Like all other markets in Canada last year, Edmonton’s retail sector faced many challenges presented by the COVID-19 pandemic but lately activity in the commercial real estate scene is on fire.
Paul Raimundo, Vice President, Retail Leasing & Sales for JLL, said Edmonton and Alberta in general started 2020 strong with a number of transactions but when COVID hit “essentially the deal flow part of the process shut down for four months.”
“And nobody did anything. Everybody sat still, had a little bit of opening back June and July (2020), people started thinking that maybe this was over and then we got to the second/third wave. Everybody thought okay it’s not over and so they paused again,” said Raimundo.
“The uncertainty was the biggest issue with the pandemic. It was when is this going to move along. But we saw a big push in the fall from August to the end of December. We saw a lot of activity. Lots of transactions happened. Lots of pent up stuff. We were opened kind of and then we got shut down again in December. We did see a good amount of transaction volume in the back half of the year. It didn’t make up for what we had lost during the timelines just because the world stopped in the third week of March and didn’t really pick up until August.
“When we look at the beginning of this year, we started seeing good velocity in inquiries, good velocity in transactions. Even to start 2021, even with the little close down we had. There were deals in the queue. Everybody could kind of see the end of the tunnel. The last six weeks in my opinion has been extraordinary. The velocity is through the roof on inquiries, franchises, people looking to replace restaurants that couldn’t make it. Not everybody is transacting yet, but the level of activity and discussion around trying to do deals has dramatically picked up.”
According to a JLL report, leasing activity in 2020 was down 20 per cent compared with 2019. Percentage of available space advanced by 1.4 per cent during 2020 to 5.9 per cent. About one million square feet of new retail space entered the market last year.
In the second half of 2020, Edmonton asking rents for available space went sideways, while Alberta effective rents for occupied space decreased by nine per cent, said the report.
“The 2021 outlook is of market adjustment. In Q1 2021, the amount of available space continues to increase. Consistent lower levels of construction and new supply will eventually provide a rebalancing of supply and demand. Asking rents should remain stable,” said JLL.
“Edmonton’s retail sales decreased by two per cent in 2020 – the best performance in the West after Vancouver . . . Pedestrian traffic along downtown’s retail corridors remains lower as transit stations see traffic cut by almost half. With workplace traffic significantly down, the commercial district has lacked office workers.”
After the closure of Holt Renfrew in January 2020 and consequent shuttering of Gucci’s in-store boutique, JLL said Gucci recently opened a standalone location at West Edmonton Mall. Denmark-based LEGO opened an experiential store in the West Edmonton Mall last fall. That’s the second LEGO store in Edmonton, as in 2013 the retailer opened a location at Southgate Centre. Costco opened its first business centre concept in the west in west Edmonton, geared towards small businesses such as restaurants and convenience stores.
Set to be Canada’s largest mixed-use sports and entertainment district, ICE District plans this year to open the second floor of the food hall in Stantec Tower and ICE District Plaza. In 2022, developer One Properties will open 98,000 square feet of retail in Block B/G including Loblaws CityMarket, The CANADIAN ICEhouse, and The Banquet, said the JLL report.
It added that Southgate Centre is expanding its offering by partially demolishing and expanding the site of the former Sears department store. Approximately 260,000 square feet will be added or modernized. Sporting Life is said to be among the new tenants.
Raimundo said when the deals were stopped in 2020 the conversation continued. Not about transactions but what did businesses and landlords need help with.
“Not really focusing on the deal but focusing on the relationship between us and the retailer, us and the landlord, and us, the landlord and the retailer all together,” he said. “You’ve seen a great amount of innovation between retailers and landlords. You’ve seen a change in the hard and fast line ‘no this is what the lease says too bad’. Either the tenant or the landlord. ‘We both need to survive here. How do we survive together?’
“The innovation that happened and the entrepreneurial spirit between landlords and tenants over the last 12 months has been fantastic and it’s actually started to redefine a little bit I think this hard and fast that’s my side that’s your side and little more transparency continues on. It’s all about working together.
“I don’t know how sustainable the current pace is today but it feels like it used to feel when Spring kicks in.”
Raimundo said the downtown retail will likely continue to struggle though until people return to offices. That will be a typical response across the country.
For example, Edmonton City Centre Mall has been decimated through the pandemic. Many for lease signs are visible.
“It’s just going to take time for the consumer to come back downtown,” added Raimundo.