Retailers set to ride out economic downturnDec. 16, 2008 By Laura Severs - Business Edge Mall developers looking ahead to future growth The global economic downturn has yet to put a dent into new Canadian retail developments. Developers continue to bring more retail space into play, by renovating existing centres or building new ones. And they're moving forward despite an economic slowdown that is expected to see shoppers playing Scrooge this holiday season. Many mall developers are also in expansion mode, with major centres getting much more than just facelifts. In Ontario, Toronto's Fairview Mall just completed a $90-million renovation in mid-November, with in-demand American retailers such as Aeropostale, Bath & Body Works, Hollister and an Apple Store among the mall's new tenants. In Alberta, South Edmonton Common, Canada's largest big-box power centre, just unveiled the country's largest Future Shop, a 53,000-sq.-ft. concept store with fitness equipment, musical instruments and home automation equipment that could set the mark for new outlets across the country. Meanwhile, U.S. retailers such as Bed, Bath & Beyond; Coach, Crate & Barrel; and Restoration Hardware are either just entering the Canadian marketplace or expanding the limited number of stores they have on this side of the border. "I've seen more of them (international and U.S. retailers) come in the last 18 months than in the last five years," says John Crombie, senior managing director of national retail for commercial real estate firm Cushman & Wakefield LePage. "A lot of U.S. retailers who we talk to see Canada as a good market to enter. The sales are solid here. There's a lot of appetite from Canadian consumers for those types of stores. Canadians, on a whole, spend more in American stores (in Canada), than on Canadian stores." Crombie says growth in the Canadian retail marketplace, particularly new space coming into play, is not contradictory with the slowing economy or the fact that retailers are facing hard times on the other side of the border. In the U.S., chains such as Bombay Co. shuttered its stores (Canadian stores remain open under new Canadian ownership); Disney closed some 100 North American stores with the overwhelming majority in the U.S.; Linens-N-Things is going out of business (taking its Canadian operation down as well); and numerous others are downsizing their chains including Circuit City, which is chopping 155 U.S. stores to leave it with 566, reducing future store openings and aggressively renegotiating certain leases. None of its Canadian stores are affected. "The biggest contrast between the U.S. and Canada, is they have arguably 50 percent to 60 percent more retail space per capita. Retailers have much more ability to do faster expansions in the U.S. than in Canada," says Crombie. "We're not over-retailed. Probably one of the biggest frustrations we have, as a real estate brokerage, is we just can't get enough sites, which is good news in a downturn." The bottom line, adds Crombie, is that there's more resilience in the retail market than many believe. But that doesn't necessarily mean it will be smooth sailing on this side of the border. It will be a blue Christmas, according to Toronto-based Kubas Consultants, a marketing research and consulting firm that includes a retail focus. Until this fall, Canadian retail sales appeared to be in good shape, with third-quarter retail sales up 4.5 percent year over year. But all that has changed with the stock market meltdown and ensuing global financial turmoil, says Ed Strapagiel, executive vice-president at Kubas. "So what we're looking ahead to at this point is perhaps three quarters of a dip in retail fortunes (starting with the fourth quarter of 2008)," says Strapagiel. "Consumer confidence has just fallen off a cliff and even though our employment situation is pretty good, one can't be terribly optimistic." Strapagiel adds that it's widely recognized that Canada is in a lot better shape than other countries. Many retail developers are also forging ahead. Montreal-based Ivanhoe Cambridge is confident that its CrossIron Mills retail project on the outskirts of Calgary won't be affected by current economic concerns. Already 83 percent leased, the project is scheduled to open in August 2009 and could lead to similar projects in Montreal and Vancouver. "Leasing is coming along very well. There continues to be great interest, notwithstanding the slowdown in the economy," says John Scott, vice-president of development for Ivanhoe Cambridge. "It all comes back to the success we're having with the Vaughan Mills (just outside Toronto) model." Sales at Vaughan Mills, for the 12 months ending October 31, are up 11 percent. "This says an awful lot on how well that is doing considering the economy we're in," adds Scott. Edmonton's South Edmonton Common is just shy of filling its 2.2- million-sq.-ft. of retail space, which will also include fashion retailers, a Marks Work Warehouse and Pro Hockey Life store. "I think we are very fortunate that many retailers know about the retail appetite of Alberta shoppers, which on a per-capita basis is still among the highest in Canada," says Tony Rota, director of marketing for Edmonton-based Cameron Development Corp, the majority owners of South Edmonton Common. Even though stores may have been planned when the economy was stronger, retailers are proceeding on the basis that they still expect the stores to perform well, Rota adds. Independent Canadian retailer Triple Flip, a Calgary-based clothing chain aimed at tweens, also likes what it sees, even in these economic times. "We've had an interesting experience with our Edmonton opening; it was a record-breaking opening for us. For a single day in our company's history, it's the best we've done by far," says Linda Maslechko, Triple Flip's president and co-founder. The chain now has future expansion plans in the works, including a second Edmonton store at West Edmonton Mall in 2009. Northbrook, Ill.-based Crate & Barrel, a contemporary furniture and housewares retailer, recently opened its first non-U.S. store in Toronto's Yorkdale Shopping Centre. "When we enter a market, we have a long-term commitment to this expansion. We know there's great opportunity for our brand in Canada and were absolutely looking at other key markets there," says Vicki Lang, Crate & Barrel's public relations manager, adding its second Canadian store will open at Calgary's Southcentre mall in the fall of 2009. (Laura Severs can be reached at laura@businessedge.ca |