21 as well. As if those signings weren’t enough of a coup, part of the 41,200sqm expansion – called the Fashion Galleria – boasts an impressive roster of Australian brands and a new David Jones. The Macquarie Centre expansion poses some fascinating questions for the Australian shopping centre industry. The obvious one is how the international players will do in a suburban Sydney shopping centre. Particularly as Macquarie isn’t analogous to Chadstone or Bondi Junction, which have added overseas retailers like you add a fourth clarinet to a wind section. Macquarie is starting up a whole new orchestra from the ground up. The large number of domestic brands with their hats in the ring poses an equally important question, which is whether or not the homegrown retailers can pull their weight in the shadow of some of the world’s most ruthless and efficient competitors. This goes as much for the terrible twins of the department store sector – David Jones and Myer – as it does for the specialty stores. Pleasingly, the new David Jones looks resplendent next to Uniqlo on the third level. Down below on Level 2, the DJs cosmetics floor also sparkles, which it will need to do as it goes up against competition from more popular open sell concepts based on the Sephora model. Shopping centre owners clearly continue to believe that department stores have a role to play in the shopping centre tenant mix, although no one has come up with a convincing explanation of what that role is. Anyone of a suspicious nature might even think that the principal reason for their deployment in a shopping centre is simply to ensure that the centre maintains its status as a regional or super regional centre for valuation purposes. It has always been a basic tenet of the shopping centre business model that tenants benefiting from foot traffic generated by others should pay higher rent than the traffic generators themselves, who go by the general moniker of ‘anchor store’. These anchors have traditionally included supermarkets, department stores, and other big boxes. But what if the department stores benefit more from their smaller co-tenants, like global fashion retailers like Uniqlo, H&M, and Zara, than the latter benefit from them? Then you have a role reversal. Myer’s CEO was reported not so long ago in the media as saying that his own Melbourne flagship got a foot traffic lift when Zara opened next door in Bourke St Mall. Could he really argue with a straight face that new international retailers in places like Macquarie Centre need Myer more than it needs them? This raises an ugly question: Shouldn’t department stores be paying more rent to earn their keep? Without doubt, if the industry is to stay true to the original business model. Will they? No, probably not. Instead they will in many instances free ride on the charity of others, while continuing to blurt their relevance to anyone who will listen. An interesting model is gaining momentum overseas whereby large specialty fashion retailers are sub-leasing underperforming department store space. Forever 21 is a pioneer in this area. The latest to try this is European value fashion operator, Primark, which is leasing seven spaces averaging almost 7000sqm inside Sears department stores in the northeastern US. The parent department store in each case is shrinking into a space of around 10,000sqm. In one case – King of Prussia Mall, in Philadelphia – the Sears department store will reportedly cease operations altogether, ceding 10,000sqm on the ground floor to Primark and 7000sqm on the upper level to to a sporting goods superstore. This is a model that Australian shopping centre operators might look at in conjunction with their own department stores. At the moment, Australian department store retailers have less room to manoeuvre than their American counterparts because they don’t have as much control over their own stores – landlords place restrictions on their ability to sublease. But what if a department store was able to sublease a large gob of space to a good, traffic driving retailer like Primark and the shopping centre operator got a cut of any upside to be had? The centre wins with a busier anchor and more dollars, the consumer wins courtesy of a relevant and desired retail offer, and the department store wins by converting loser space into productive, income generating space. Like every other innovation in the Australian retail industry, a thousand naysayers will raise their voices to explain why this cannot happen. Excuses excuses. Eventually though, something always gives. Michael Baker is principal of Baker Consulting and can be reached at michael@mbaker-retail.com and www.mbaker-retail.com.