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January 2022
CONSUMER REAL ESTATE CANADA
The Takeaways & Trends - Cross-Canada Consumer Real Estate Market Conditions Conference Call

FROM MAIN STREET TO THE MAIN MALL AND ANYWHERE THAT RETAIL HAPPENS IN CANADA…KEEPING RETAILERS, FOOD SERVICE SPECIALISTS, E-COMMERCE PROFESSIONALS, RETAIL SPACE BROKERS, BUILDING OWNERS & DEVELOPERS AND INDUSTRY SUPPLIERS CONNECTED!

It’s easy to participate and it’s free. To join the monthly cross-Canada consumer real estate market conditions conference call, please visit www.CREC.live to request an invitation to dial in.

The JANUARY call was sponsored by Perspective Interiors:
"Developing strategies in space planning to achieve the best commercial & retail design."
www.perspectiveinteriorsyyc.com

TOP INDUSTRY TRENDS

Holiday season 2021, hard goods clearly outperformed soft goods with Boxing Week sales poor for most part.

Inventory, flow of goods west to east has improved as early predictions call for continued problems and delays as shipments from offshore to continue for most of 2022 as well as higher freight costs.

Labor is very much a major issue at both the retail store level and head offices, wage costs are up substantially and poaching of staff by competitors and non-competitors continues.

Retailer insurance renewal costs are up 20 – 40%.

Major mall landlords are playing it tough on lease renewals and not hesitating to take spaces back. E-commerce pre-Pandemic was 10 – 15% of a retailer’s sales now 25 – 40%.
The Restaurant Association of Nova Scotia said it expects to see hundreds of restaurant closures with the continuing increased numbers of COVID-19 cases.

Something to be mindful of when writing offers, especially on shell space is the extra time it is taking to secure materials, supplies and trades. What used to be 2-3 months lead time is now about 4-6, and that is assuming the tenant and/or landlord has their ducks in a row.

Major office anchor tenants in Vancouver include tech sector heavy weights Spotify & Amazon along with legal and accounting companies such as Deloitte, Ernst & Young, Blakes and DLA Piper

CREC News - Watch for announcements in the coming days on the appointment of the 2022 CREC Advisory Panel members and the 2022 Chair of Consumer Real Estate Canada as well as CREC student engagement and talent development initiates. A new monthly Zoom gathering event will also be announced soon that will feature expanding retailers and food service firms presenting their expansion programs.

The Takeaways…regional call contributors reporting:
Newfoundland & Labrador - Nikki Poole CBRE - nikki.poole@cbre.com

  • Mary Brown’s Chicken owner, Greg Roberts has an accepted an offer on the downtown Keg & Jack Astor’s building on the waterfront that was previously listed for $8 million. Mary Brown’s has the arena naming rights for the former Mile One Centre, now called Mary Brown’s Centre.
  • Village Mall has secured some new tenants, 7300 square foot billiards facility, an optometrist, health services tenant moving into this enclosed mall property.
  • A large national HVAC company has purchased industrial property in the market. Industrial is still leading the way.

Atlantic Canada - Vicki Carr - Hardman Group - vcarr@hardmangroup.ca

  • Ontario chain Chung C·Retail is open at 50% occupancy and restaurants are takeout and delivery only with salons and spas closed along with entertainment venues and gyms.
  • New Brunswick has enhanced and extended the Small Business Grant Program where eligible businesses can apply for $10,000 in funding. Eligible businesses include restaurants (excluding quick-service restaurants with drive-thru options), caterers, drinking establishments, retail stores, gyms and fitness facilities, personal services including barbers, hair stylists, spas and entertainment centers.
  • Quebec based franchise Pizza operator Salvatoré is opening its first pizza and poutine restaurant in Quispamsis just outside of Saint John, New Brunswick, this family owned business operates 38 locations in Quebec and will be expanding further in the New Brunswick market and across Canada.
  • In Halifax, the Puma Outlet and Coldstream Clear Distillery are now open in Dartmouth Crossing, Taiwanese chain White Alley Bubble Tea has opened their first Canadian store in downtown Halifax.
  • The Restaurant Association of Nova Scotia said it expects to see hundreds of restaurant closures with the continuing increased numbers of COVID-19 cases, loss of revenue in December was cited as a factor along with existing staffing shortages combined with the repercussions of the government cutting dine-in capacity limits. Nova Scotia 170+ new businesses open in 2021.
  • The Province of Nova Scotia announced Sector Impact Support Program that aims to support business affected by the latest COVID-19 restrictions; the program provides a onetime grant up to $7,500.
  • Prince Edward Island lowered its small business tax rate to 1% on January 1, projected that PEI business owners will save $2.8 million in 2022.

Quebec - Tony Flanz - Think Retail - tflanz@thinkretail.ca

  • As of Jan 18, retailers including box stores require proof of vax to enter their stores.
  • Running wear specialists Ciele Athletics opened first location on Notre Dame in Montreal.
  • Boustan Lebanese cuisine opened their first location outside Quebec on Rideau Street in Ottawa.
  • Earlier in December, Polestar, the Swedish electric automotive brand, opened its new Polestar Montreal showroom on Chomedey Blvd. in Laval.
  • Quebec-based Alimentation Couche-Tard Inc. announced an agreement with Slidell Oil Co., a convenience and wholesale fuels business based in Louisiana and related entities under which Couche-Tard has acquired 17 convenience stores operating primarily under the Purple Cow banner as well as 23 wholesale fuels accounts across three southeastern states.
  • Montreal-based developer Forum and real estate firm Crofton Moore acquired the Mega Centre Sainte-Foy, a 529,000 square foot retail power centre in Quebec City.
  • Matelas Dauphin announces plans to open 4 new locations in Quebec in 2022. Size required is 3000 square feet, contact Robert Constatin @ Intercom.
  • Montreal outerwear brand Gorski opened their first store on Greene Avenue in Westmount.
  • Columbus Cafe signed to open at Carrefour Laval.

Ontario - Lawrence Mosselson - Behar Group - lawrencem@thebehargroup.com

  • Ontario is currently under a lock down with retail at 50% capacity, there is no indoor dining, gyms, & theatres are closed. The winter school break was extended to January 17 though a major blizzard means that schools remain closed.
  • This year has started out slowly given the current lockdown situation. While we continue to see some demand from national and franchise QSR tenants, there is a definite slowdown in deals with independent tenants. On the positive note, there seem to be a significant number of new retail developments coming to market throughout Ontario.
  • We also continue to see plans for the redevelopment and densification of enclosed mall properties throughout the GTA. In addition to the previously announced proposals for malls such as Cloverdale Mall, Sherway Gardens, Bayview Village, Agincourt Mall, & Yorkdale a proposal was just released for Pickering Town Centre which would see half of the mall demolished & replaced with a combination of residential/commercial space.
  • In an encouraging sign for the downtown office market, Royal Bank Plaza is currently under contract at a price of more than $1.2 billion with the sale reported to be to a company owned by the founder of retailer Zara. The property is currently owned by Oxford Properties & CPPIB & it was reported that the buyer was successful after 2 rounds of bidding, after Morguard reportedly dropped out of the bidding process. The property is 42% leased to Royal Bank of Canada which made it an attractive purchase opportunity for a lot of global investors.
  • New York’s Blackstone Group recently bought an industrial portfolio of 16 properties for $312M, one of the largest deals of its kind ever in the GTA. The properties are located in Brampton, Mississauga & Etobicoke & were 99.9% leased. The vacancy rate for industrial properties in the GTA was 0.6% at the end of 2021.

Manitoba - Michael Stronger - Shindico Realty - MStronger@Shindico.com

  • Bagels are back in Winnipeg with 2 new local stores recently opening, Hudson’s Bagel and Bagelsmith with the latter to be opening a second location in 2022.
  • Leopold’s Tavern will be opening their 4th Winnipeg location in a former freestanding Pizza Hut at 1347 Henderson Hwy. Had Manitoba gone into complete lockdown like Quebec and Ontario this opening would have been delayed indefinitely, however they made the decision to open as planned even with 50% capacity restrictions.

Saskatchewan - Melissa Newton - The Commercial Group - melissa@thecommercialgroup.ca

  • COVID-19 has particularly impacted retailers both big and small, with the ongoing labour shortage and with COVID-19 cases having many workers call in sick. Some local restaurants close with a moments notice for an entire weekend, Sephora was also closed on a Saturday for deep cleaning, a very busy Starbucks location also had to temporarily close. These are short term issues, but I do also believe it speaks to the general labour shortages but is no shortage of available positions available with retailers.
  • It’s been back to business here in Saskatchewan for a couple weeks and contrary to years past, what is truly dominating our retail market at the moment is not leasing but sales transactions. Typically, our brokerage is 70/30 leasing to sales but we are seeing a complete flip. That said, a lot of these transactions were started in Q4 of 2021 and is setting us up for a strong sales season. I believe this comes from people wanting to take advantage of the current lower interest rates as we have been told these may be increasing steadily over this year.
  • As for the leasing market, this time of year is always a good time to prepare for the year ahead with many lease renewals underway. We are seeing landlords keep current rates as no one really wants to rock the boat. One of our drive-thru Taco Bell locations just recently closed and expecting the landlord to see a lot of interest for that site as QSR drive-thrus are incredibly difficult to find.
  • Something to be mindful of when writing offers, especially on shell space is the extra time it is taking to secure materials, supplies and trades. What used to be 2-3 months lead time is now about 4-6, and that is assuming the tenant and/or landlord has their ducks in a row. We know how long transactions can take to complete and this is adding another layer of complexity.
  • Industrial market in Saskatoon currently has a 3.75% vacancy and retailers that are looking for small warehouse space that is almost non-existent. The sales market in this sector is also very strong with both owner/user and investment portfolios. Overall, it looks like we are optimistic for another strong year.

Alberta - Edmonton - Brett Killips - Cushman & Wakefield - Brett.Killips@cwedm.com

  • We are beginning to see new market entrants in the restaurant and indoor participant recreation categories, California Pizza Kitchen is under construction at Currents of Windermere, PF Chang’s completed a deal also at Currents of Windermere, in the location of a former Swiss Chalet space, Spartans Greek Taverna opened late last year in the former Chili’s at Currents of Windermere, Blower’s and Grafton recently opened at Currents of Windermere, indoor participant recreation uses are beginning to be active again, Rollers Roller Rink has taken over a former Spa Lady space in Christy’s Corner shopping centre on St. Albert Trail.
  • Generally, restaurants remain open in Alberta with some restrictions, however, hiring in service industries remains the largest challenge and some local restaurants are moving to a take-out only model, not because of government mandates but because of staffing shortages.
  • Edmonton City Club announced its new location that will be opening in the Fall of 2022 as a social club located on the third floor of City Centre Mall.

Alberta (Southern) - Monika Blachut - Fairfield Commercial Real Estate - monika@fairfieldcommercial.com

  • Northwest Calgary is a hotbed of retail development and redevelopment with the previously announced Northland Village redevelopment by Primaris, the new University District Mixed-use project and now the redevelopment of the 1960’s era Stadium Shopping Centre adjacent to the Foothills Medial Centre on 16th Avenue NW. The site will be transformed into The UXBorough, a multi-million dollar, 830,000-square-foot urban village where the master plans calls for two residential towers, a hotel, a medical office building, one commercial office building and a central commons amenity plaza along with 1,100 underground parking stalls. Phase 1 includes the eight-storey 146,000-square-foot medical centre office building, a 14-storey, 203-home residential tower; 480 underground parking stalls; and the central commons amenity plaza in the middle of the site. It is expected to be completed by early 2024.
  • Calgary’s High Street entertainment zone, 17th Avenue SW continues to evolve with the recent opening of iconic Calgary retailer Calgary Jewellery in a new 6,000 corner flagship location. Other new business that have opened in the recent past are the 10,000 square foot Whisky Rose Saloon nightclub, De Ville Coffee, South Street Burger, Amato Gelato and Higher Ground Coffee in a former Starbucks location.

British Columbia - Neil McAllister - Lee & Associates - neil.mcallister@lee-associates.com

  • Ongoing construction in Downtown Vancouver continues at a dizzying pace with 2.9 million square feet of new office space underway that is 70% preleased.
  • All the new office construction projects have varying amounts of retail on the main floor podiums with landlords seeking retail tenants that are an amenity and complimentary to the office components, such as restaurants and service orientated users.
  • Overall office vacancy rates in downtown Vancouver dropped from Q3 7.6% to 7.2 % in Q4.
  • Major office anchor tenants in Vancouver include tech sector heavy weights Spotify & Amazon along with legal and accounting companies such as Deloitte, Ernst & Young, Blakes and DLA Piper.
  • According to cell phone data, the Downtown Business Association concludes that downtown foot traffic is at 68% of pre-pandemic levels.

Notable Industry Trends - Stan Boniferro - Lee & Associates

Case Study Example of a single store retailer’s Pandemic strategy:

I work with a few single venue Retailers/Food Service companies. We recently looked at a Vancouver based art store catering to children’s interest in art. They do this through the sale of art, books and supplies. The shop also offers in-store classes limited to 12 participants per class.The company has been in business for 12 years & pre-Covid the store had a web site that was limited to booking classes and reviewing products. Online sales were limited and accounted for approx 8% of sales including the booking of classes.

Changes made in 2020:

  • Ramp up online sales & online presence
  • Social Media role in sales increased, Instagram, Facebook. Purchases from the website site
  • Limit class size to 8 & increase price to maintain income levels Create virtual classes accessed via website

Results in 2020:

  • In store sales down +- 60% except for Dec., up 10%
  • Online sales increased to replace lost in-store sales resulted in an overall 10% increase in sales
  • In-person classes started with strong participation but waned mid year
  • Virtual classes sporadic at first improved as product/ experience improved.

2021 Performance

  • Online sales through the year continued to improve especially Instagram. In store sales flat to down 5 - 10% month over month
  • In-store classroom converted to a studio to create virtual classes & kits that supplemented the classes. Result was a better product & improved sales.
  • November/December in-store sales up double digits. Inventory levels were increased especially art kits that have a higher margin.
  • Lease renewed Jan 2021 for 5 years on a gross rent basis.

Retailers Outlook for 2022

  • Increase in-store, merchandise levels, leverage the virtual classes & accompanying kits.
  • Continue to take advantage of all government assistance, invest in the website design, labelling, increased inventory levels & staff retention.

CREC Advisory Panel Updates
Slava Fedossenko CRRP - Avenue Living -
sfedossenko@avenueliving.ca

The fourth edition of CREC Talk Shop Zoom meeting was held on January 12th. We were joined by Darryl Schmidt, Vice-President of Retail Leasing for Cadillac Fairview. We had a fascinating discussion about trends in shopping centre leasing, both in Canada and abroad, as well as his insights on where we have come from, and where we are going in the consumer real estate industry. With Darryl’s national perspective and reach, he really has his finger on the pulse and was able to share some incredible insights with us.

If you are interested in learning about all facets of the consumer real estate industry from leaders in their respective fields across the country, and to see your industry friends and colleagues in a relaxed coffee shop environment, we’d love to see you on the next CREC Talk Shop zoom meeting!

Watch for announcements in the coming days on the appointment of the 2022 CREC Advisory Panel members and the 2022 Chair of Consumer Real Estate Canada as well as CREC student engagement and talent development initiates. A new monthly Zoom gathering event will also be announced soon that will feature expanding retailers and food service firms presenting their expansion programs.

If you haven’t already, please visit our website. It’s easy to remember - www.crec.live. All the CRECLIVE call Takeaways & Tends that you have received over the last 18 months, as well as all past Talk Shop Zoom episodes are there as we build a database of knowledge and content. There you will also find links to the CREC LinkedIn and Facebook pages, as well as a link to the Go Fund Me. There is no cost to participate in CREC, so your donations are most appreciated to help cover our fixed costs as CREC continues to grow.

Please complete this quick, one minute survey, to help CREC plan for 2022.

Keynote speaker: Phil Lichtsztral, Richter Consulting Services

Our special guest on the Call was Phil Lichtsztral, a partner with Richter Consulting Services based in Montreal. Phil provides advise to retailers, on corporate reorganizations, restructuring, mergers and acquisition, retail organization structure and insolvency. It’s been quite a ride in consumer real estate in the recent past and we enjoyed his update on the Canadian retail scene.

Trends

  • Holiday season 2021, hard goods clearly outperformed soft goods with Boxing Week sales were poor for the most part.
  • January, traffic and sales to date, relatively off with gross margins eroding and retail restrictions are hurting
  • Inventory, flow of goods west to east has improved as early predictions call for continued problems and delays as shipments from offshore to continue for most of 2022 as well as higher freight costs
  • Labor is very much a major issue at both the retail store level and head offices, wage costs are up substantially and poaching of staff by competitors and non-competitors continue.
  • Retailer insurance renewal costs are up 20 – 40%.
  • Major mall Landlords are playing it tough on lease renewals and not hesitating to take spaces back when necessary.
  • Furniture and junior women’s apparel are clear winners.
  • E-commerce pre-Pandemic was 10 – 15% of a retailer’s sales now 25 – 40%
  • Strong retail activity south of the border.