CBD Retail Hopes Rise on Back of Melbourne David Jones Sale

Hopes are high Melbourne’s retail property market has turned a corner with the $223.5-million sale of the iconic David Jones Bourke Street Mall store. It is the largest single-asset retail transaction in Melbourne’s CBD in more than eight years. The landmark sale to Melbourne-based fund manager IP Generation represents more than just a property transaction, JLL senior director Nick Willis said, with the transaction “marking a significant milestone in the resurgence of CBD retail investments”. The historic seven-level property with a GLA of about 25,000sq m had been fully leased back to David Jones on a secure triple net lease with 18 years remaining, demonstrating the retailer’s long-term commitment to its flagship location. “Australian icons such as David Jones, Bourke Street Mall are rarely traded,” Willis, who brokered the sale alongside Sam Hatcher, said. “The opportunity presented a unique investment proposition of irreplaceability, income security and long-term value.” The transaction comes on the back of CBD retail sales volumes in 2024 sitting 87 per cent below historical averages. But Melbourne’s CBD retail vacancy rates have recorded a five-year low of about 5 per cent, significantly below the national CBD retail average of 12 per cent. Insiders hope the David Jones sale signals renewed confidence in the CBD retail sector, which has transformed dramatically since pandemic-era vacancy rates plagued the precinct. ▲ David Jones, Bourke St Mall, holds the title of the country’s longest-continuously operating retail establishment. David Jones recently completed a $38-million refurbishment of the property, transforming its top three retail floors and ground-level beauty department. The renovation has attracted luxury retailers—Louis Vuitton is to open in the store this year, joining high-end brands including Gucci and Aesop. Further cementing the area’s revival, JD Sports has secured a significant portion of the Bourke Street Mall frontage at the new Melbourne Walk development, which topped out in October last year . JD Sports’ Melbourne Walk tenancy was the largest retail leasing transaction in Melbourne’s CBD for 2024. JD Sports ANZ chairman Hilton Seskin said the 1631sq m flagship store would be the retailer’s largest in Australia. “By securing a prime location in one of Melbourne’s most iconic retail hubs ... we are tapping into the city’s vibrant, fashion-forward culture and growing demand for sports lifestyle product,” Seskin said. “We view this location as a key retail hub with strong potential for ongoing success and a prominent long-term presence.” Colliers’ associate director, head of retail leasing Victoria Tom Larwill told The Urban Developer that “the retail landscape in Melbourne’s CBD continues to experience significant growth, with the Bourke Street Mall positioned at the heart of this revitalisation”. Larwill said the JD Sports announcement has sparked significant interest from retailers worldwide, with “many of these brands now choosing Melbourne as their first entry point into the Australian market”. He said there was a “notable shift in momentum” in the latter half of 2024, with growing enthusiasm from retailers seeking prime locations. This positive trend continued into early 2025, “reflecting Melbourne’s standing as a key destination for both consumers and global retail brands”. Steadfast Capital executive director Teck-Lay Tay told The Urban Developer there had been “significant interest in retail spaces along Little Collins Street and The Causeway”. “These boutique areas are easily accessible by pedestrians, with the internal North-South arcade set to link Bourke Street Mall to Little Collins Street and an East-West laneway that will connect The Causeway to Union Lane.” ▲ Melbourne Walk will also be home to IHG’s first Australian dual-branded hotel in Australia, Holiday Inn and Hotel Indigo. IP Generation managing director Chris Lock pointed to those developments as key factors in the acquisition decision. “The gentrification occurring around Bourke Street, with the new Melbourne Walk development, is further strengthening the precinct, which coincides with David Jones’s major store refurbishment and new luxury tenants opening,” Lock said. Recent data from Colliers revealed that despite cost-of-living pressures, retail spending across Victoria increased by 2.8 per cent in June of 2024 compared to the previous year. The City of Melbourne’s Pedestrian Counting System recorded an average monthly visitation of 25 million to the CBD in the year ending August 2024. The David Jones transaction represents several significant—and mostly positive—trends, a JLL spokesperson said. The sale demonstrates strong appetite for premium retail assets with long-term, secure covenant tenants. The successful integration of luxury retail within traditional department store spaces suggests an evolving retail model that combines heritage architecture with contemporary retail demands. JLL said that development constraints and the imbalance between supply and demand will further reduce vacancy rates and drive strong rental growth in the sector. This outlook is supported by IP Generation’s strategy to combine the David Jones property with the recently acquired Cranbourne Park Shopping Centre into a new fund with total assets of approximately $350 million. According to JLL, the historic property, which has operated continuously since 1911 and was originally built for Buckley &amp; Nunn’s department store before David Jones acquired it in 1982, represents the kind of irreplaceable retail asset that continues to attract institutional investment despite broader market challenges.

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