This article is from the Australian Property Journal archive
IN the biggest shake-up of Brisbane’s retail landscape in decades, Myer will shutter its Queen Street Mall flagship after falling out with landlords Vicinity Centres and ISPT over the terms of a new lease.
The major department store accounts for more than half of the 63,000 sqm-plus in the eponymous Myer Centre. Its decision to not exercise the lease renewal option comes amid an ongoing floor space rationalisation program, which it has previously stated would total 110,000 sqm in store closures or relinquished excess space, and little more than a week after it announced a record $1.88 billion first-half sales, and 101% increase in profit to $65 million, to which it attributed its dual online and bricks-and-mortar retailing strategy.
However, Myer CEO John King said that “like all retailers, we remain cautious about the macro-economic environment”. The rising cost of living and the impact of growing interest rates are expected to hit Myer and its rival David Jones, and as the $260 billion savings buffer accumulated during the pandemic becomes depleted.
Vicinity Centres and ISPT said in a statement, “Vicinity and ISPT were investigating a number of options for the centre, including a downsized contemporary department store and plans without a department store, which we can now progress with certainty”.
“We look forward to delivering a reimagined destination in the heart of Brisbane’s evolving CBD and anticipate sharing our plans shortly.”
Myer’s lease ends in July, bringing to a close 35 years of trading at the site. Its April 1988 opening came just ahead of the city hosting the World Expo.
King said, “Whilst we remain committed to the Brisbane market, we have been unable to negotiate a reasonable commercial outcome with the landlord and as such will continue to look for an alternative CBD location”.
Myer’s stores at Indooroopilly, Chermside, Carindale and Mt Gravatt would all remain open, King said, and Myer Centre staff would be offered redeployment opportunities.
Myer closed its Frankston store in bayside Melbourne in January, following closures of stores in Blacktown last year, and Knox, Emporium, Horsby and Logan previously.
Brisbane Lord Mayor Adrian Schrinner said that “While this is a sad day for generations of Brisbane residents who have loved shopping at the Queen Street Mall Myer, it’s also a great opportunity for our city centre”, adding that “now is the perfect time for the centre’s owners to reimagine one of Queensland’s premier retail spaces”.
“I think this is a fantastic opportunity for the centre to be reinvigorated into a vibrant, modern retail experience for residents and visitors and I look forward to working with the owners on their future plans.”
According to Vicinity Centres, the Myer Centre receives 16.4 million visitors each year.
Myer’s CBD stores increased sales by 5.7% in the first half, or 20.0% on a comparable basis, when lockdown periods are excluded. Landlords including Vicinity Centres had seen multiple valuation hits in the lead-up to COVID amid retail headwinds before their CBD assets suffered from lockdowns that emptied cities of workers, shoppers and visitors.
Vicinity has the Myer Centre listed at $420 million as per a June 2022 valuation, on a capitalisation rate of 5.75%. It was valued at $732 million when ISPT bought into the property in 2012.
Major department chains continue rationalisation
David Jones, too, has been undertaking a store rationalisation program, with former owners last year Woolworths Holdings targeting 36,000 sqm in cuts just ahead of selling the business at the end of last year. It notably cut space at its Melbourne CBD stores in Bourke Street Mall and in Sydney as part of major property transactions, while also closing stores at Barangaroo and Fortitude Valley in recent years.
Woolworths Holdings ended its direful affair with the department chain in December; it sold the 185-year-old business to Sydney-based private equity firm Anchorage Capital Partners for just a tiny fraction of the $2.1 billion it paid eight years ago, as inflation hit 7.8% and the Reserve Bank made consecutive rate hikes, and following hefty writedowns of more than $1 billion as it battled the growth of online shopping and more recently COVID.
The two department stores have also turned to last mile logistics to keep costs down, as industrial space is cheaper compared to space within shopping centres.
In recent years experts estimate that Myer and David Jones have handed back over 100,000 sqm of space they were using for storage within shopping centres, thereby saving them tens of million of dollars in rent every year.
