Deka demise should breathe new life into the retail market

Thursday 22nd March 2001

By Campbell McIlroy

Having run down many of its unprofitable Deka stores Farmers Deka now faces the prospect of trying to find new tenants for the 43 sites it has chosen not to rebrand as Farmers stores.

But Colliers Jardine broker Ash Hira said the demise of the Deka retail chain could breathe new life into some of the sites as landlords would inevitably have to invest some money in their properties to make them attractive to prospective new tenants.

New tenants would also help lift the profile of the buildings they occupied.

"Rather than a business in demise you'll have retailers who are on the up occupying the space."

The closures would also have a negligible impact on the retail market as the Deka sites were spread over a wide geographical area, with typically only one store in each centre, Mr Hira said.

"Some are only 400sq m to 500sq m in small provincial centres," he said.

The closures have also offered an opportunity for major branded retailers in expansion mode.

Farmers has publicly stated a desire to expand its 160,000sq m of retail space by 30% over the next two years.

Farmers Deka chief executive Nick Lowe said the 17 stores it had kept would probably be used to supplement existing Farmers stores.

But the company had decided to increase the average size of its stores to between 7500sq m and 9500sq m, so some of the 17 stores might be consolidated in the future, he said.

Farmers Deka parent Foodlands has made a $A20.7 million provision for the closure of the Deka stores, some of which will go toward outstanding leases as well as redundancy payments and stock write-downs.

Mr Lowe would not comment on the terms of the remaining leases other than to say they ranged from expired leases on a month to month tenancy through to longer- term leases.

Meanwhile, The Warehouse has already added 52,000sq m of additional space so far this financial year.

Warehouse property director Glen Inger said he had requested information on the sites Farmers was not taking over.

Mr Inger said some of the Deka sites were in towns where The Warehouse did not have stores in but which fell below its population criteria of 16,000.

However, the company had been considering expanding into centres with populations of between 10,000 and 13,000, he said.

Many of the Deka sites were old strip- focused department stores with little or no carparking, which did not suit The Warehouse's style of retailing, he said.

But Mr Inger said some of the sites might be suitable for its Warehouse Stationery brand. Over the next five years Mr Inger expected The Warehouse would expand its 300,000sq m of retail space to somewhere between 400,000sq m and 450,000sq m, or from 10%-12% a year.

He said the closing Deka sites would not have a huge impact on the retail property market as they were mostly smaller sites which would be easily absorbed by the market.

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