Canadian retail landscape experiences positive but mixed results: CBRE
CBRE’s H1 2023 Retail Rent Survey highlights the retail trends and rents for 11 cities across Canada.
The CBRE Retail Rent Survey for the first half of 2023 offers an overview of retail trends and rental rates in 11 Canadian cities. Key highlights include the thriving nature of open-air shopping centers, with community, neighborhood, and convenience centers experiencing increased rental rate ranges in three out of 11 markets. Demand for space in these formats remains robust, especially when anchored by grocery or food establishments.
Despite the various challenges faced by major urban areas, there is still strong demand for prime locations. The report reveals that 30 per cent of high streets and streetfronts saw an appreciation in rental rates.
Furthermore, mixed-use developments, both urban and suburban, are gaining popularity, with rental rate increases observed in three of the 11 markets.
Montreal and Calgary reported the highest number of rental rate increases, with eight and six formats or key urban areas experiencing growth, respectively. Halifax followed with five increases, and Toronto with four.
Despite prevailing economic conditions, sentiment remains optimistic across the markets. Positive activity continues, especially in top-tier locations, which are leasing quickly.
In Victoria, the downtown office market is experiencing a decrease in demand, and the new hybrid work model is adding to the challenges faced by retailers that rely on daytime foot traffic. During the seasonal months, the cruise and tourism industry is anticipated to bring additional activity to downtown retail areas.
In suburban areas, grocery-anchored shopping centers remain highly sought after and have outperformed streetfront retail in recent quarters. Mall and plaza spaces continue to be in high demand, maintaining a consistently low vacancy rate year after year.
Colwood Corners has recently finished construction and is now more than 80 per cent leased. The redevelopment of University Heights will encompass both residential and commercial components, with completion planned over multiple phases. The Commons at Royal Bay is nearing its final stages of construction and will provide over 76,000 square feet of retail space.
In Calgary, securing tenant financing poses a challenge, but it isn’t hindering growth in the city. Daycare providers have experienced significant growth in the city, and personal service businesses have made a strong comeback. On the other hand, fashion retailers are actively exploring alternative brick-and-mortar locations.
Downtown Edmonton office towers are encountering challenges in securing retail tenants, and they are beginning to consider these spaces more as building amenities. Consequently, the right tenant may have the opportunity to negotiate rates that are above the standard. Landlords are increasingly open to flexibility in deal structures to facilitate these arrangements.
The ongoing conversation revolves around rising interest rates and concerns about an impending recession. Many retailers are in no rush to expand and are opting to wait until market conditions become more favorable before committing to new locations.
In Winnepeg, ongoing developments are shaping the landscape, with notable projects such as The Refinery District spanning 27 acres of retail space, Sage Creek Village North, which will occupy 14 acres for retail purposes, and Polaris Place, a mixed-use development that combines retail and multifamily buildings.
Leasing activity is on the rise as brands target Toronto. This phase of expansion and development has led to the depletion of large floor spaces in the city center and an increase in rental rates. The supply pipeline is becoming more limited, and in combination with decreased vacancy rates, it is driving greater interest in second-tier properties.
Halifax remains a hub of robust leasing activity. Restaurants, both local and national, pet-related businesses, salons/spas, and professional and financial services are all expanding. Vacancy rates are consistently decreasing as these retailers occupy new properties and existing spaces.