Let's Go Shopping! Canada's Growing Shopping Centre Industry

Written by Posted On Wednesday, 03 October 2007 17:00

Last week the International Council of Shopping Centers (ICSC) held its Canadian conference in Toronto, celebrating the 50th anniversary of the worldwide organization. While the real estate downturn in the United States is threatening to hurt retail sales there, so far the industry's outlook is bright in Canada.

Even in the U.S., however, "while there are clear signs that some sectors of our economy, and even the real estate industry, have peaked, other areas remain remarkably resilient, even strong," Michael Kercheval, president of the ICSC, told the conference. "Retail sales are holding up, leasing activity overall is robust, and jobs remain more plentiful. So, all is not bad and this turbulence will be weathered."

According to the HBC company website , West Vancouver's Park Royal Shopping Centre was Canada's first shopping centre. It opened in September 1950 as an open-air mall. Now, Canada is home to 2,350 shopping centres, with more than 432.7 million square feet of gross leasable area. The average size of a Canadian shopping centre in 2006 was 184,520 sq. ft., the highest level on record. What the industry calls "shopping centre inclined" sales were up six per cent from the year before and accounted for 65.6 per cent of all retail sales in Canada, and shopping-centre related employment was up by 2.7 per cent.

Ontario has almost 1,000 shopping centres and accounted for 41.8 per cent of the Canadian total in 2006, but booming Alberta registered "phenomenal" growth in 2006, says a report by Jean Lambert, ICSC's manager of global research. He says that while Quebec ranks second in the number of centres, Alberta is now third with 335 shopping centres -- more than British Columbia, even though B.C. has a larger population. Alberta is also home to Canada's largest shopping centre, the West Edmonton Mall, which bills itself as "the world's largest entertainment and shopping centre and Alberta's number one tourist attraction".

In his speech at the Toronto conference, Kercheval said that "retail real estate has been and will always be at the core of real estate investment portfolios. Perhaps less glamourous than five-star hotels and less conspicuous than multi-storey skyscrapers, the shopping centre remains a high-performing core component of a diversified real estate investment portfolio."

He said that the world's REIT markets, currently valued at more than half-a-trillion dollars, have almost 25 per cent invested in retail. And, Kercheval said, virtually every North American pension fund has an interest in shopping centres.

"Some funds such as Caisse de depot and Ontario Teachers are major players in the shopping centre industry," he said. "It would be a safe bet to say that almost all families across North America have some financial stake in shopping centres due to the allocation of individual investment accounts in mutual funds, pensions and other retirement plans."

Over the years, shopping centres have had to adapt to changing consumer tastes. HBC says that since the opening of West Edmonton Mall in the 1980s, "there has been nothing built to rival it," and that there are three new trends in mass retailing. "The first is the Big Box store, of which Home Outfitters is an example. These are often clustered together to form power centres, which in many ways harkens back to the first open-air park-and-shops," says HBC. "The second trend is toward town centres. These developments are attempts to fuse the best elements of the enclosed mall with the old Main Street retail experience. They often incorporate office and living spaces as well as spaces for cultural and civic activities, in effect creating miniature cities. The final trend is toward the virtual mall, where service providers deliver access to groups of online retailers and offer users access to Internet-commerce applications."

Kercheval said in his presentation that, "Just as suburban malls met the demographic and social needs of North America's shifting populations in the 1950s, '60s and '70s, the adaptation of Asia's and Europe's successful mixed-used development format is becoming common-place today.

"We are seeing that far from being a simplistic bundling of land uses, a successful mixed-use project embodies a thoughtful tailoring of consumer lifestyle needs within a structure that maximizes the value of its location," said Kercheval.

But he said a project with multiple uses also has multiple ways that it can fail, and a failing hotel, office, residential or retail component can bring down the whole project.

"The other reality borne about by experience is that every successful true mixed-use project must have retail as its core," he said. "So rather than seeing mixed-use as a threat to the retail property business, it is the next opportunity."

The ICSC has a conference about mixed-use development scheduled for November 16 and 17 in Hollywood, Fla.

"In emerging markets as well as in mature economies, organized retail is one of the greatest catalysts for economic development," said Kercheval. "Underserved urban markets and rural markets offer rich retailing opportunities and they pay back to the communities huge dividends in terms of jobs, tax revenues, value creation, lower product prices, and even less pollution as consumers travel shorter distances to purchase goods and services."

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Jim Adair

Jim Adair has been writing about Canadian real estate, home building and renovation issues for more than 40 years. He is the former editor of Canada’s leading trade magazine for real estate professionals, as well as several home building, décor and renovation titles. You can contact him at [email protected]

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