The combination of more office people and students working from home, store closures and a decline in tourism took its toll last year on the downtown Montreal retail market as the COVID-19 pandemic swept across the province.
But there were some positive signs in the sector and now with vaccinations rising and COVID cases falling there is hope a buzz of activity will return to the core of the city.
Manon Larose, Senior Vice President, Retail with JLL, said an important element of the retail industry in the Quebec city during the pandemic was the collaboration that took place between the landlords and their retailers.
“Everybody was in the same boat. Some landlords really jumped in to help and to help the retailers to go through that period. I also have a lot of sympathy for the landlords because nobody gave them some free mortgage period. It was pretty challenging,” said Larose.
“What I see is a lot of dynamism and a lot of people who are interested to come back to business. Whenever there is a disaster there are opportunities as well. But downtown Montreal suffered the most because of the lack of the office workers, the tourists, the students. We had the strictest measures in Montreal. So everybody really suffered.
“But now one thing I’m really seeing talking to a lot of people is that the honeymoon of working from home is over and people want to come back to a real life as quickly as possible.”
She said annual retail sales in 2020 fell by five per cent.
According to a JLL retail market report, the Montreal retail market environment remains challenging, as Quebec has now experienced several lockdowns. Although Toronto implemented one of the longest lockdowns in the country, Montreal has implemented probably the strictest lockdown measures, it said.
“Effective rents for occupied space fell by three per cent in the second half of 2020 as the result of rent concessions and discounts by landlords. In addition, lower retail sales in Q4 reduced rents in sales-based lease agreements,” said JLL.
“A recent report showed that 28 per cent of downtown Montreal stores were vacant or temporarily closed in Q4. The same study also revealed that the retail vacancy/temporary closure rate on Sainte Catherine Street increased from 18 per cent in Q2 to 23 per cent in Q4, and in shopping malls from 18 to 20 per cent.
“The redesign of Sainte Catherine Street continues to progress, and work is currently taking place in Phillips Square and the section between Robert-Bourassa and Mansfield.”
Larose said retail categories that were on the rise during the pandemic included cannabis, wine and beer, building materials, everything related to groceries, electronics and appliances, sports and fitness.
“The top performing brands in 2020 were Amazon, Apple, Wayfair, lululemon, Peloton and Restoration Hardware as well as Shopify,” she said.
The JLL report said Montreal-born fashion boutique WANT Apothecary surprised everyone in March when it announced that it was closing all brick-and-mortar locations to focus on its online brand WANT Les Essentiels. The retailer closed its flagship store on Sherbrooke Street West in Westmount, adding another empty storefront to the noticeable vacancy on the street.
“As in several Canadian cities, retailers in Montreal have been concerned that downtown could become a permanent ghost town. Office workers, tourists, and students haven’t traveled to the area since COVID broke out. Montreal downtown workers have adapted well to working from home, which raised the question of whether most of these 300,000 employees will ever go back to the office. In Q4, more than half of businesses based in office towers were vacant or temporarily closed,” added the report.
“Famous for a tourism market that helps propel retail, and especially luxury, downtown Montreal’s hotels have suffered. While 2019 occupancy rates were an average 74 per cent, in 2020 occupancy rates never rose above the 20 per cent mark set in April of 2020.”
The report said Montreal City Hall is lining up a series of summer initiatives in partnership with local organizations, setting aside more than $30 million in investments. These include support for bars and restaurants to reopen, greater flexibility for patios, and free-street parking on weekends.
“Robust pre-COVID fundamentals are indicative that downtown Montreal can recoup its daytime population quickly once tourists return and students shift back to in-person classes, which includes 120,000 students from local universities,” said the report.
Larose said the impact on downtown Montreal in the past year “was terrible in a way.”
But there were positive notes, she added.
For example, Japanese fashion brand Uniqlo opened its largest store in Canada at the Eaton Centre. The two-storey downtown store is streetfront and carries a selection of home goods, which other locations don’t.
The Montreal Eaton Centre has seen several notable openings, including Time Out food hall, Decathlon, and Sephora. Samsung Canada, and Pandora also opened locations. The Samsung store was its first in Quebec and sixth Samsung Canada Experience Store.
French fashion brand ba&sh, whose global expansion is backed by LVMH, opened its second standalone Canadian store in Montreal’s affluent Westmount area last summer. The retailer opened its first store in Toronto’s Yorkville in early 2020.
“There were some openings and some good stories,” said Larose. “And from what I hear Uniqlo’s sales are extremely good. So you can just imagine what it will be when the students and everybody will be back downtown.
“I think creativity is the word of today and that goes for everybody. For the landlords as well as for the retailers. You have to reinvent yourself. I see a bright future. I know the physical stores are there to remain especially when you see an Amazon of this world opening some physical point of sales. I think it says it all.”
Larose said the pandemic accelerated some of the trends the retail world was already experiencing such as ecommerce and online shopping.
The JLL report said HBC and RioCan will pursue the redevelopment of HBC’s downtown Montreal property into a 25-storey office tower and the downsizing of the existing Hudson’s Bay retail space. The Sainte-Catherine Street store will continue to operate throughout the construction process.
The opening of the Royalmount complex near the intersection of highways 15 and 40 has been postponed to the summer of 2023 due to the pandemic. In February of 2020, developer Carbonleo unveiled a second version of the project with less retail, entertainment and office space and more residential and green space, added JLL.