David Jones: Westfield landlord Scentre Group faces costly fallout from department store disaster
The department store’s collapse threatens a $30 million annual rental shortfall in 2028 for Scentre, as investors dumped the shares on Monday.
Westfield shopping centre operator Scentre Group faces rental shortfalls and a profit hit as department store chain David Jones prepares to close stores across its network.
The 188-year-old retailer hasn’t paid rent to its Westfield landlord since October 1, with Morgan Stanley warning Scentre will need to find replacement tenants for about two-thirds of David Jones’ floor space across its shopping centres.
The investment bank’s analyst Simon Chan said the expected closures posed a significant earnings headwind for the Westfield operator, with the rental shortfall potentially weighing on profits for years.
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By continuing you agree to our Terms and Privacy Policy.“At a headline level, this does not look good for a major landlord like Scentre Group,” said Chan.
“We estimate that David Jones is circa 5 per cent of the company’s proportional floor space, the company has confirmed that the department store chain contributes $45 million a year of gross rent.”
Legal administrators appointed to run the department stores as they search for buyers or other financial backers are still liable for rent as long as each store stays open.
Morgan Stanley estimates Scentre Group faces a rental shortfall of $17 million in 2027 and $30 million in 2028 as a result of the David Jones shortfall.
This translates into a potential profit shortfall of 2.5 per cent by 2028 for Scentre, according to Morgan Stanley.
Scentre shares sunk 4.4 per cent to $3.45 in response to the worries on Monday and have tumbled 18.4 per cent in 2026.
The failure of David Jones also threatens 6,000 jobs, as retailers contend with online competition, plunging consumer confidence, falling house prices and a sharp increase in borrowing costs.
The Reserve Bank has raised interest rates five times this year in its battle against soaring living costs that force consumers to spend less on upmarket retailers.
Alternative tenants
David Jones occupies space across 16 Scentre-owned Westfield shopping centres in Australia and one in New Zealand, covering about 200,000 square metres, or roughly 5 per cent of Scentre’s total shopping centre floor space.
In total the group has 38 stores that are all still trading as its bankruptcy administrators examine sale options.
Scentre will now scramble to find alternative tenants to fill floor space with new tenants.
Morgan Stanley said shopping centre operators had to deal with the closure of department stores such as Myer or David Jones for most of the past decade.
“What investors may underappreciate, in our view, is that since 2020, Scentre Group and Vicinity Centres have combined repurposed more than 108,000 square metres of leasable area across 13 shopping centres, following the downsizing / departure of various David Jones and Myer tenancies,” said Mr Chan.
Between 2020 and 2023 five Myer stores closed that were leased from Scentre-parent Westfield. The floor space was eventually replaced by other retail tenants such as Harvey Norman, Kmart, Aldi, and TK Maxx.
Six David Jones leases were also terminated at Westfield centres between 2024 and 2025, with replacement tenants including Nike, Rebel Sport and gym operator Virgin Active.
Scentre said on November 4 it remained on track to pay dividends of 18.47 cents per share in 2026, representing a yield of 5.3 per cent.
Customer visits to its Westfield destinations rose 3.2 per cent to 14 million in the year to November 1, the group said.
Morgan Stanley has cuts its share price target on Scentre shares by 10 per cent from $4.40 to $4.00.
