Canada's top malls form $1,000-per-square-foot club as sector stays resilient

Avison Young releases study of Canada's retail landscape and top-performing retail malls

TORONTO, March 30, 2016 /CNW/ - With online sales growth in Canada expected to outpace that of the overall retail market in the coming years, traditional stakeholders are not only embracing e-commerce, but fortifying their bricks-and-mortar presence with significant capital investment and innovation as they adapt to the constantly morphing shopping landscape. Thus far, the country's leading retail centres have performed consistently well, and the retail real estate sector continues to attract its share of investor interest.

These are some of the key findings of a study by Avison Young on the Canadian retail real estate landscape, released today.

"Despite economic headwinds, retailer failures, digital disruption and the purchasing habits of a new generation, Canada's evolving retail property sector and its top malls are doing just fine," comments Bill Argeropoulos, Principal and Practice Leader, Research (Canada) for Avison Young. "While hundreds of millions of dollars have been invested to renovate, expand or upgrade some of the country's prominent malls to attract new retailers and combat e-commerce, the retail sector continues to attract new entrants and significant investor interest as well."

Avison Young's retail landscape study, which is summarized in an illustrative infographic, brings together information gathered from several sources.

"More than $4.5 billion worth of retail assets changed hands in 2015, accounting for almost 20% of the overall commercial real estate investment sales volume in Canada," adds Argeropoulos. "Though retail property investment sales volume was down 31% from 2014, retail as an asset class has been a hot commodity coming out of the Great Recession with almost $32 billion in retail property sales completed since the end of 2009, second only to the office sector with $35 billion."

The study shows British Columbia (6.6%) and Vancouver (9.9%) were the leading province and city in the nation, respectively, for retail sales growth in 2015, followed by Ontario (4.5%) and Toronto (5.4%). However, oil-dependent provinces (Alberta and Saskatchewan) will have the weakest outlook for retail sales in 2016, with Calgary and Edmonton expected to see declines of 2.3% and 2.2%, respectively, by year-end 2016.

Argeropoulos notes: "Canada's top 10 performing malls had 2015 retail sales of at least $994 per square foot. Rounding that lowest figure upward, these centres form an exclusive '$1,000-per-square-foot club,' largely backed by the country's biggest institutional owners. The leaders in this club can hold their own among the top-performing malls in North America."

Argeropoulos also notes that, according to Statistics Canada, the retail industry is the leading employer in Canada, accounting for slightly more than 15% of jobs nationwide at year-end 2015. The retail sector's recent performance is attributed to a number of positive factors. Among them is a weak Canadian dollar, which is discouraging Canadian consumers from crossing the border to shop in the U.S. and, at the same time, boosting domestic sales. Other positive factors include relatively low vacancy, controlled new supply and solid population growth, especially in major urban regions.

The study's other highlights note that:

• Toronto's Yorkdale Shopping Centre was Canada's most productive mall with retail sales of $1,610 psf in 2015, displacing Vancouver's Pacific Centre, which topped the list one year earlier;
  
  
• The top 10 malls accounted for 10% of the total retail mall rentable area and 12% of the total number of stores in 2015;
  
  
• Year-over-year retail sales growth among the top 10 malls ranged between 3% and 20%;
  
  
• Pension funds and their real estate arms (e.g. Cadillac Fairview, Oxford Properties, AIMCo, and Ivanhoé Cambridge) own and manage the country's top-performing malls, in some cases as joint ventures;
  
  
• Five of the 10 top-performing malls in Canada are in Ontario, and four of the five Ontario centres are located in the Greater Toronto Area;
  
  
• The retail property sector achieved the highest total annual return (8.8%) of the major asset types tracked by the REALpac/IPD Canada Property Index in 2015 – outpacing the overall index return of 8%.

Argeropoulos concludes: "Despite the retail sector's strengths, there are also weaknesses, namely: Uneven retail sales and GDP growth, record-high consumer debt levels and the Canadian-U.S. exchange rate, which could lead to higher wholesale costs and squeeze profits."

Avison Young is the world's fastest growing commercial real estate services firm. Headquartered in Toronto, Canada, Avison Young is a collaborative, global firm owned and operated by its Principals. Founded in 1978, the company comprises 2,100 real estate professionals in 75 offices, providing value-added, client-centric investment sales, advisory, management, financing and mortgage placement services to owners and occupiers of office, retail, industrial and multi-family properties.

Editors/Reporters
∙ Please click on link to view and download Avison Young's Canadian retail landscape and mall performance study infographic:
http://www.avisonyoung.com/fileDownloader.php?file=files/content-files/Research/Links/2016/CanadaRetailLandscapeMallPerformanceInfographic.pdf

For further information/comment/photos:

• Bill Argeropoulos, Principal and Practice Leader, Research (Canada), Avison Young: 416.673.4029; cell 416.906.3072 [email protected]
  
• Sherry Quan, Principal, Global Director of Communications & Media Relations, Avison Young: 604.647.5098; cell: 604.726.0959 [email protected]

www.avisonyoung.com

Avison Young was a winner of Canada's Best Managed Companies program in 2011, 2012, 2013 and 2014 and requalified in 2015 to maintain its status as a Best Managed Gold company

Follow Avison Young on Twitter:
For industry news, press releases and market reports: www.twitter.com/avisonyoung 
For Avison Young listings and deals: www.twitter.com/AYListingsDeals 

Follow Avison Young Bloggers: http://blog.avisonyoung.com

Follow Avison Young on LinkedIn: http://www.linkedin.com/company/avison-young-commercial-real-estate

Follow Avison Young on YouTube: www.youtube.com/user/AvisonYoungRE

SOURCE Avison Young Commercial Real Estate (BC)

Bill Argeropoulos, 416.673.4029, email: [email protected]