Victoria’s downtown retail vacancy rate rose from 3.1 per cent in the fourth quarter of 2019 to 6 per cent in the fourth quarter of 2020 which confirms the pressures the market faced in a pandemic year, according to a report by commercial real estate firm Colliers Canada.
Also, the city’s shopping centre vacancy rose by 0.8 per cent over the year to finish 2020 at 5.8 per cent.
“2020 started with very optimistic expectations for the vibrancy of the downtown core. 2019 had been a strong year for the downtown and the prediction was that 2020 would continue the trend with downtown residents, office workers and record tourism figures all driving the market forward. By March 2020, however, it was clear that the predictions were going to be incorrect. Although downtown residents continued to offer some life to retailers, the occupants of office space largely were forced to work from home and tourism was severely restricted,” said Colliers.
“Thankfully, government programs provided much needed support and many retail and restaurant operations have been able to hold on through this challenging period. Wage subsidies, rent subsidies and other small business programs have combined to minimize the damage to downtown businesses.
“Furthermore, with the local market not travelling, retailers did benefit from local support throughout the year. Canadian residents and particularly lower mainland residents also took the opportunity to visit Victoria instead of travelling abroad, providing some level of relief to local retailers and restaurants.”
Nathaniel Simpson, Sales Associate with commercial real estate firm CBRE Limited, said government support helped local businesses as did a trend by consumers to shop local. And many landlords did help tenants through the challenging times.
“Everyone managed to survive. Revenues are down but the profits because of the subsidies are actually up for a lot of people,” said Simpson.
“The pandemic created a real opportunity for Victoria to take a hard look at just how sustainable the market is without the tourism dollars, without the cruise ships, which is huge. Hundreds of millions of dollars. Tourism is a billion dollar industry in Victoria. A lot of that comes from cruise ships.
“Over COVID, it’s been a real opportunity for retailers to see how sustainable their businesses are and then focus on the experience for the local community. The ones that have done well, they know that they haven’t relied on tourism dollars.
“The local community did rally to keep businesses alive, especially food and beverage.”
Some small retailers have suffered because many consumers are going to Amazon and buying smaller items. But the trend was already shifting toward that experience prior to the pandemic, which simply accelerated some of that in the market.
“Everyone’s had to reinvent and luckily a lot of the businesses are still around and this time last year we didn’t know that was going to be the case. As a Realtor I get lots of people from people out of town saying ‘I’m a restaurateur. Send me a list of all the closed restaurants because I’m looking for existing infrastructure’. And there is no list. We don’t have a list of closed restaurants to send. There’s one or two. It’s not a doom and gloom as we felt we were at risk of last year,” said Simpson.
While the vacancy rate in the retail market has increased, Simpson said it remains a healthy market at a six per cent rate.
“At least now there’s a few more options,” he said.
The Colliers report said the next market test for Victoria will be balancing the eventual pull back from government subsidies with an expected increase in office workers returning to the core and tourism gradually strengthening.
“We do predict that this balancing act will be difficult to time perfectly for all retailers which will likely create additional pressures. Additional retail vacancy in the latter part of 2021 may be the result,” it said.
“For the majority of 2021, however, we do anticipate that the market will maintain status quo. It is anticipated that outcomes will become much easier to forecast as we progress through 2021, particularly as vaccination programs reach the larger population and consumer shopping patterns become more transparent. There is no question, however, that a timely and broad-based vaccination program will have an immediate and positive impact on sales for retailers and more importantly, for restaurants and hospitality venues in Victoria.”
Colliers said the suburban shopping centre market remained very strong through 2020 due to the large number of centres offering both essential and basic goods and services (grocery, liquor, pharmacy and take out). For those retailers most impacted by shutdowns, government programs once again provided a buffer to a drop in sales. Strong occupancy numbers in the suburban retail sector were also supported by a lack of any new shopping centres being added to the inventory in 2020, it said.
“The most challenged sector for the retail market continues to be interior enclosed shopping centres. Largely driven by fashion retail sales, these centres were already seeing challenges pre COVID-19, with the pandemic accelerating a shift in shopping trends and behaviours to the convenience of on-line shopping and same day delivery. The enhanced shift in consumer shopping resulted in several failures or companies in creditor protection such as Pier 1 Imports, Reitman’s, Victoria’s Secret and Aldo. Once again, government funding in 2020 helped to slow the decline of this market sector, however, 2021 will likely see an increase in downsizing of retailers serving this market,” added Colliers.
“The key for these enclosed shopping centres will be how to reinvent themselves in order to accommodate what is likely to be a new and smaller footprint approach from retailers while finding utility for excess land and buildings.”
*Images courtesy of the Downtown Victoria Business Association (DVBA)