Myer moves out of Melbourne’s Emporium as office space surges in demand

In 2014, Melbourne’s luxury Emporium was supposed to revitalise retail, but the latest news reflects the change in fortunes.

Myer will give back the keys to its prized spot in central Melbourne’s glitzy retail hub as the department store struggles to keep up with rental costs.

The once-prestigious chain will be consolidated back to its base on Bourke St and leave the fourth floor of the Emporium to be leased as office space and converted into co-working facilities next year.

The retreat is indicative of the changing tide as the sector grapples with a so-called retail recession while demand for office space soars, realestate.com.au chief economist Nerida Conisbee says.

Both Myer and David Jones have plans to shrink stores across the country and there had been doubts about what would become of the large areas occupied by the once-mighty retail chains.

But the strong demand for office space presents a shift in the make-up for central rental spaces.

Myer merchandise executive general manager Adam Stapleton unveils Myer’s floor in the Emporium in 2014. Picture: Norm Oorloff

Melbourne CBD’s record office vacancy rate (3.3 per cent) is the most in demand in the country while central Sydney (3.8 per cent) has fallen to its lowest level since 2008, according to figures from the Property Council of Australia.

Ms Conisbee expects this shift away from Myer and David Jones to commercial tenants will continue as the department stores look for efficiencies amid a continual decline in sales.

“The handing back of Myer’s space is reflective of the fact that, right now, retail is the most challenged commercial property type,” she said.

RELATED: Myer and David Jones to shrink and restyle its brand

A Myer spokesperson confirmed to news.com.au it would move its children’s wear, toys, travel goods, men’s footwear, underwear and apparel out of the nearly 7000-square-metre space at the Emporium.

“This is part of our customer-first plan to ensure our stores are operating in the most effective and productive way, with an absolute focus on reducing our rent bill,” the company said.

RELATED: David Jones’ third straight year of failing sales

“Importantly, for our customers, there will be no change to our product offer.

“All departments currently located in Emporium level four will be accommodated back into our Bourke St store.”

Myer says no staff will be cut as a result of the move, which is part of its plan to reduce floorspace as it also intends to do in Cairns and Canberra’s Belconnen.

The glitzy Emporium has a range of retail and food offerings.

Myer’s nearly 7000 square metre floor will be converted to co-working space similar to this.

Property Council of Australia Victorian director Cressida Wall said the record low levels of available office space was a looming issue for the expanding city.

“To 2023, Melbourne CBD will supply approximately 650,000sq m of new commercial stock,” she said in a statement.

“However half of that stock is pre-committed and there is little to no new office space in the pipeline beyond 2023.

“With Melbourne’s population set to match that of Sydney by 2028, immediate action is required to ensure that Melbourne’s CBD is able to accommodate its growing workforce.”

RELATED: David Jones struggles amid ‘retail recession’

David Jones slashed its value by $437 million on Thursday as its parent company based in South Africa declared Australia’s retail sector was in recession.

The food and clothing group Woolworths Holdings bought the prestigious network of stores in 2014 for $2.1 billion as part of chief executive Ion Moir’s plan to turn the company into a leading southern hemisphere retailer.

But the value of the beleaguered department store chain has shrunk to $965 million after the writedown, the second since 2018, frames a bleak picture for department store operators around the world as shoppers opt for broader product ranges from global online players, such as Amazon.

In response to the changing trends, David Jones beefed up its online offering, cut costs and store space and refurbished its Elizabeth St flagship store in Sydney, which will introduce exclusive brands in clothing, footwear and lingerie.

But the cost-cutting endeavours have been hampered by a slowing Australian economy as property prices fell and consumer spending stalled.

Woolworths Holdings said it would book an impairment of $437.4 million against David Jones, reducing the valuation of the department chain to about $965 million.

“This writedown reflects sustained and unprecedented economic pressures and structural changes in the Australian market,” a Woolworths spokeswoman said.

“The retail sector in Australia is currently in recession, and the Australian economy has slowed to its weakest level since the global financial crisis in 2009.”

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