retail vacancy rates

Retail vacancy rates reach historical low

Tuesday, October 1, 2019

Retail vacancy rates reach a record low – 2.3 per cent – in key markets as inventory grows according to JLL’s Mid-Year Retail Outlook. The average asking rent growth has decelerated from its peak last year but remains positive.

General retail reached the highest net absorption in the first half of the year with over 2.2 million square feet, followed by shopping centres with 1.4 million square feet of net absorption. In contrast, malls have seen a slightly negative net absorption and a corresponding marginal increase in vacancy rates. This is particularly prevalent in Western Canada, where landlords are keen on redeveloping retail spaces, repositioning existing tenants or bringing new options to become more competitive in the marketplace.

Growth Drivers

  • The top contributors to sales growth are grocery, beer, wine and liquor, jewellery, luggage and leather goods; as well as furniture sales.
  • Cannabis sales have also seen exponential growth with its recent legalization.
  • International migration has been a major driver of Canada’s population growth. Since the government introduced a more transparent and streamlined immigration system in 2015 — Express Entry — there have been new ambitious admission targets.
  • Canada has felt the impact of North American chains consolidating or closing stores but to a lesser extent than in the U.S.
  • There are several other indicators that show Canada’s luxury market continues to grow and thrive. Last month, it was reported that Toronto’s Bloor-Yorkville retail corridor is the most expensive in Canada and the fifth priciest in North America.

Cities at a glance:

Toronto
The Toronto retail market remains strong and vacancy rates continue to tighten, reaching a record low of 1.9 per cent in the second quarter of 2019. Average asking rents have continued to increase this year in both the GTA and downtown Toronto at 3.2 and 3.4 per cent respectively. The outlook for the metro is positive as new construction is delivered with high pre-lease rates.

Toronto continues to be a North American point of entry for both European and Asian retailers and a natural expansion city for U.S. businesses.

Montreal
Montreal is the second-fastest-growing metro area in Canada, and the sixth in North America and set to become a world-class foodie destination. The city saw the greatest increase in retail sales in the past 10 years – just shy of 10 per cent.

Vancouver
The Vancouver retail market continues to be tight across all property types: retail vacancy rates have reached a record low of 1.3 percent, and average asking rents grew by 2.0 per cent this year. Historic low deliveries coupled with demolitions have kept the city’s total retail inventory relatively static.

Edmonton
As part of the city’s effort to revitalize the downtown core Loblaw City Market announced it will open a 22,000 square foot store in the ICE District – set to become the largest mixed-use sports and entertainment district in Canada. Amazon is also expected to open its second fulfillment centre in 2020, near Edmonton International Airport.

Download the full report here.

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