David Jones will conduct an extensive review of its property portfolio as its heads into a period where leases are expiring and stores are being redeveloped into smaller formats.
The search is also on for new sites in neighbourhood strips across the country, of about 7000 square metres, based on the village format store in Malvern, Melbourne.
It is one of the most thorough reviews being planned by the department store chain in many years.
In the past, the leases were automatically rolled over, irrespective of the performance of the stores.
But in the next five years, leases for six stores will expire, and David Jones is expected to vacate and use the opportunity to take up smaller spaces in locations better suited to its prestige demographics.
Traditionally landlords start negotiating commercial leases at least a year out to ensure they can lease the site. But if the tenant is leaving, the owner needs notice to plan for any redevelopment so as to minimise any loss of rent.
Outgoing chief executive Paul Zahra said at the first-quarter results announcement last week that the present portfolio consisted of 38 stores, of which six leases, in "less robust demographies", were due to expire in the next five years, and another three stores were to open by 2016 "in attractive demographies".
Suburbs such as Mosman, and Toorak in Melbourne, would be targeted for smaller, village-style stores, if space of about 7000 square metres could be found.
The six leases that expire are at Birkenhead Point (September 2014); Harbour Town, Queensland (June 2015); Wollongong (October 2015); West Lakes, South Australia (December 2015); Glen Waverley, Victoria (April 2016); and Macarthur Square (April 2017).
"These lease expiries give us the opportunity to review our store portfolio in light of our broader omni channel retail strategy," Mr Zahra had said.
He said the focus for the property side of the business was to develop smaller, village formats where gross lettable area generated 85 per cent of sales (in a smaller space) than the present 75 per cent.
"In the 2010 financial year, about 73 per cent of our gross lettable area was 'selling space'. We have increased this to a current average of 76 per cent and are working towards improving this to 85 per cent of selling space in our new stores and 80 per cent in our refurbished stores."
Mr Zahra said the smaller format store was a concept David Jones would be rolling out further.
"Success at Malvern will be an important precursor to further openings," he said.
David Jones' property managers await an update on the proposal from City Tattersalls Club to redevelop the site in Pitt Street, opposite the David Jones store on the corner of Market Street.
One property developer said once the development approval had been given to the proposed 48-storey tower above the City Tattersalls Club, a buyer could make a case for buying the air rights above the department store in Market Street and build a large complex.