David Jones store closures land hardest on Australia's outer suburbs

David Jones announced on Wednesday it will close 19 stores across Australia and New Zealand, with the vast majority in outer metropolitan areas. The list includes Hornsby, Parramatta and Campbelltown in Sydney, Maribyrnong and Glen Waverley in Melbourne, and Robina on the Gold Coast.

Howard Penny, head of Real Estate and Infrastructure Research for Australia and New Zealand at Citigroup, said the closures are a symptom of financial strain in those areas after five interest rate hikes this year. S&P Global Ratings data released this week showed households in some outer suburbs of Sydney, Melbourne and south-east Queensland are more than twice as likely to be experiencing mortgage stress than the national average. Penny pointed to the demographics: new home buyers and young families, who cluster in the newer areas further out in the cities.

Nine of the closing stores sit in Westfield shopping centres owned by Scentre Group. Scentre had offered David Jones discounted rents to keep trading after the department store stopped paying rent in September. Penny said the hit to Scentre's income and rent would likely be short term and unlikely to threaten the viability of its outer-suburban centres, adding that in 18 months they may look even stronger. Scentre chief executive Eliott Rusanow said in a statement that the business is practically full, with occupancy at 99.8 per cent and strong demand for space, calling the 17 Westfield destinations a unique opportunity to introduce and grow local and international brands.

Gary Mortimer, a retail and marketing professor at Queensland University of Technology, said the closures reflect how the business model of major suburban centres has shifted. Where a big centre once leaned on a department store, a discount department store and a supermarket, he said they are now underpinned by precincts covering health, services, libraries, gyms, childcare and car washes. As the demography of those suburbs changes, Mortimer said, centres better represented by a Kmart, Target or Big W than a traditional department store should have no problems filling the space.