Massive retail investment in Vancouver

Strong market fundamentals, modest supply helping to drive new developments
Monday, September 23, 2013
By David Bell

These are heady days for Canadian retail and the Metro Vancouver retail market is no exception. The latest wave of U.S. retail entrants, coupled with strong market demand fundamentals and lack of greenfield development opportunities, has owners of existing major retail assets initiating and planning huge investments into expansion and mixed-use redevelopment opportunities.

Though retail supply growth has tended to be modest, essentially meeting the needs and wants of a steadily growing population base, new retail developments and U.S. retailer interest in the Metro Vancouver market have been significant enough to stir some dramatic and creative responses from existing asset owners in terms of bolstering the attractiveness and market share of their existing retail properties.

Modest retail supply conditions
Beyond solid demand-side fundamentals (steady population growth, higher than Canadian average B.C. consumer confidence levels), one of the key drivers of retailer and retail development interest in Metro Vancouver has been the region’s modest retail supply levels.

Metro Vancouver’s shopping mall floor area per capita has essentially kept pace with population growth, holding steady at roughly 10.6 square feet per capita over the 2010-12 period. This compares to much higher per capita shopping centre supply figures for other key Canadian retail markets of Calgary (16.4), Edmonton (17.9) and Toronto (18.1).

This modest supply also extends to open format, regional-serving “power centres” anchored by a range of big, medium and small-box retailers. Metro Vancouver’s 2012 supply figure of approximately 3.3 square feet per capita compares to more than nine square feet per capita in both Calgary and Edmonton, and nearly 4.9 square feet per capita in Toronto.

New retail formats
Strong retail market fundamentals coupled with modest supply figures have helped to drive exciting new retail development opportunities, not only from existing major players such as Ivanhoe Cambridge and Property Development Group but also from U.K.-based McArthurGlen Group, whose designer outlet concept will be introduced for the first time in North America on YVR lands, in partnership with the Vancouver Airport Authority. Planned to open in 2014, the 200,000-square-foot McArthurGlen Designer Outlet Vancouver will be the only luxury designer outlet centre to serve Metro Vancouver and, being located within walking distance of the Templeton SkyTrain Station on Vancouver’s Canada Line, will offer the region’s residents, tourists and visitors an intriguing new shopping destination. The company hopes to leverage the success it has enjoyed in 21 designer outlets across Europe, including strong relationships with luxury brands such as Bottega Veneta, Prada, Fendi and Paul Smith, to draw interest from a wide region, and hopefully stem outflow cross-border spending to what is really the closest true competition: Seattle Premium Outlets in Tulalip, Wash.

Beyond the attractive regional demographic and shopper profile, including high incomes and brand consciousness, McArthurGlen’s reason for choosing Vancouver over the Greater Toronto Area (GTA) has much to do with the GTA’s levels of competitive supply, which were seen as limiting potential market share. The outlet centre concept has already been introduced to the GTA, with Simon Property Group Inc. and Calloway REIT’s Toronto Premium Outlets in Halton Hills (350,000 square feet approximately one hour west of downtown Toronto) and the joint venture of Tanger and RioCan’s Tanger Outlets Cookstown (156,000 square feet plus 152,500 square feet expansion).

Other major retail-only additions significant enough to alter the competitive landscape in Metro Vancouver include Ivanhoe Cambridge and Property Development Group’s major joint venture projects with the Tsawwassen First Nation. Ivanhoe Cambridge’s Tsawwassen Mills will comprise 1.2 million square feet of retail and entertainment uses, and be modelled after the CrossIron Mills centre located north of Calgary. Property Development Group’s adjacent Tsawwassen Commons will add another 550,000 square feet in a complementary open-air concept. Both centres are expected to open in 2015, and the developer groups hope to generate sufficient patronage from both local and regional residents, including substantial BC Ferry terminal traffic, to support healthy sales levels.

David Bell is the senior associate of planning and retail consulting at Colliers International in Vancouver.

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