As major retailers exit the Canadian landscape leaving behind large spaces, shopping centres across the country are responding by filling those vacancies with multiple tenants.
“I can’t speak to Sears specifically, but first and foremost, gone are the days of traditional large format retailers, occupying big box stores,” says Shawn Hanson, general manager of Southcentre Mall, which houses the largest Sears store in Calgary.
“Developers that re-demise traditional anchor space can curate opportunities to add value through the differentiation of the merchandising mix, with uses and space that may not have been available otherwise.”
Martin Moriarty, Associate Vice President of Retail Leasing and Investment at CBRE Vancouver, says there’s an increasing opportunity for certain landlords with large amounts of space in their shopping centres.
“They can now segment it off and they can increase the productivity of the experience within the malls,” he says. “There’s the opportunity to take one big retailer, segment that space and create far more of an experience whether it’s entertainment, dining, fitness, education, and service.”
Darryl Schmidt, vice-president, national leasing with Cadillac Fairview’s Western portfolio office, says the backfill retailers are Sporting Life for 40,000 square feet, all on the lower level fronting from the main mall to the street, Zara for 33,000 square feet on a two-level mall access only store, (11,000 square feet on main and 22,000 square feet up) and HomeSense for about 33,000 square feet (all upper level exterior access only).
The leftover space is a combination of service corridors and storage.
“The benefits to repurposing an anchor box to smaller mid-size boxes is really threefold. First, the gross rental structures are much higher than what Target or a Sears would pay,” says Schmidt. “Second ,we typically see higher overall sales productivity from multiple users versus a single user. In the case of CF Market Mall, we should double the productivity to around $45-50 million in sales from all three boxes versus the old Target which was around $22 million. Finally, the higher sales are a by-product of higher foot traffic so the additional traffic and multiple banners has synergistic benefits for the rest of the retailers in the shopping centre by increasing overall traffic and increasing the opportunity for greater cross-shopping. Overall it’s a win, win, win.”
“This practice is becoming more popular but less by design and more as a reflection or function of market forces. With underperforming anchors failing and traditional anchors such as The Bay, Nordstrom or Saks standing pat with their current fleet size, an array of mid-size box retailers is really the logical replacement strategy. The costs to carve up the space and in the case of CF Market Mall add multiple units of vertical transportation are expensive but the financial and non-financial benefits outweigh the added expense.”
In September, Retail Insider reported that one of Canada’s first shopping centres, Le Boulevard, in eastern Montreal, will undergo a major redevelopment of 100,000 square feet which anchor Hudson’s Bay will vacate in the fall of 2018.
“It is 100,000 square feet on two levels. We could do one 100,000-square-foot tenant on two levels which is possible or most likely there will be multiple tenants. Probably one or two on the second floor and three to five on the ground floor,” said Moss.
Le Boulevard, a 400,000-square-foot enclosed shopping centre, is located at the corner of Jean Talon Street and Pie IX Boulevard.
“In the recent past the vacant Target stores across Canada provided shopping centre landlords with an unprecedented opportunity to re-lease the large format spaces to smaller commercial tenants thereby broadening the offering to consumers and enhancing their properties. The Sears spaces will offer similar challenges and rewards,” says Michael Kehoe, an Alberta-based retail specialist with Fairfield Commercial Real Estate Inc., in Calgary.