The global rise of online shopping has not killed physical retail spaces.
In fact, the retail landscape across Canada is generally stable, with strong performance in select retail formats and markets, according to a report published by commercial real estate brokerage CBRE this week.
"The current economic climate, inflation, and elevated interest rates have paused leasing activity amongst some retailers, but not all," says CBRE. "As has been the case, good real estate continues to be leased quickly, resulting in limited vacancy amongst the most in-demand formats, particularly those that are unenclosed."
CBRE's report examined 11 major markets across Canada, including: Victoria, Vancouver, Calgary, Edmonton, Saskatoon, Winnipeg, Kitchener-Waterloo, Toronto, Ottawa, Montreal, and Halifax.
In general, there are two types of retailers that continue to come out on top: providers of personal services and fast-food restaurants — referred to as quick-service restaurants (QSR) in industry parlance. And just like other sectors of the real estate market, retail has been dogged by supply issues, and CBRE says that could result in further rent appreciation in the second half of the year.
Despite the sustained demand and price growth, it's hard to ignore the subplot of the return-to-office story, which is the effect reduced office occupancy is having on nearby retailers. CBRE notes that select cities have seen some challenges in their downtown cores, but — again — they're not uniform across the country and across the various retail formats.
Below are the different kinds of retail formats and which markets those retail formats are doing well in, based on the net asking rent per square foot of space.
The Regional Mall
Regional malls are the traditional shopping centre format most people think of. They tend to have a high proportion of national brands, multiple large-format stores, and oftentimes a department store like a Hudson's Bay. Regional malls usually have at least 300,00 sq. ft of retail space.
Rent Per Sq. Ft:
1. Toronto: $155 - $165
2. Calgary: $130 - $165
3. Vancouver: $100 - $155
4. Edmonton: $110 - $130
5. Ottawa: $75 - $110
The Power Centre
Power centres are usually unclosed shopping centres comprised of freestanding, and usually unconnected, single-storey big box stores, similar to an outlet mall. Typically power centre sizes range from 100,000 sq. ft to 1,000,000 sq. ft of space.
Rent Per Sq. Ft:
1. Vancouver: $35 - $55
2. Toronto: $45 - $50
3. Montreal: $35 - $45
4. Victoria: $35 - $45
5. Winnipeg: $32 - $40
The Neighbourhood Shopping Centre
Neighbourhood shopping centres are very similar to power centres, as they are typically unenclosed and anchored by a large retailer, such as a chain supermarket, but smaller. Average neighbourhood shopping centres range from 40,000 sq. ft to 100,000 sq. ft.
Rent Per Sq. Ft:
1. Edmonton: $37 - $42
2. Calgary: $38 - $40
3. Vancouver: $25 - $40
4. Ottawa: $28 - $38
5. Kitchener-Waterloo: $28 - $38
The Community Mall (Enclosed)
Enclosed community malls are smaller versions of the regional mall. They are generally anchored by supermarkets or smaller department stores, and are focused on serving the local community rather than the region at large. Sizes usually range from 100,000 sq. ft to 400,000 sq. ft.
Rent Per Sq. Ft:
1. Ottawa: $45 - $55
2. Edmonton: $40 - $55
3. Vancouver: $35 - $50
4. Toronto: $40 - $45
5. Kitchener-Waterloo: $20 - $40
The Community Mall (Unenclosed)
Unenclosed community malls are also smaller versions of the regional mall in that they are also generally anchored by supermarkets and/or smaller department stores, are typically the same size as an enclosed community mall (100,000 sq. ft to 400,000 sq. ft), but takes the form of a more open-air format.
Rent Per Sq. Ft:
1. Calgary: $42 - $46
2. Ottawa: $35 - $45
3. Edmonton: $38 - $43
4. Kitchener-Waterloo: $32 - $42
5. Vancouver: $20 - $40
The Strip Mall
The strip mall retail format is focused on providing convenience for people in the immediate area and their daily needs, offering a narrower mix of goods and services. Sizes are typically under 40,000 sq. ft.
Rent Per Sq. Ft:
1. Calgary: $38 - $40
2. Ottawa: $32 - $40
3. Kitchener-Waterloo: $32 - $40
4. Edmonton: $28 - $35
5. Vancouver: $20 - $35
The Mixed-Use Retail
Mixed-used retail formats occur as part of a property with a different primary component, such as in the podium of a residential or office building. Depending on whether its in an urban market or suburban market, the kinds of retailers and sizes can vary.
Rent Per Sq. Ft:
Urban Market
1. Vancouver: $65 - $90
2. Toronto: $35 - $65
3. Montreal: $25 - $65
4. Ottawa: $35 - $45
5. Calgary: $25 - $35
Suburban Market
1. Vancouver: $60 - $90
2. Montreal: $25 - $60
3. Toronto: $30 - $50
4. Calgary: $45 - $45
5. Victoria: $25 - $45
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