The COVID-19 pandemic of the past year or so has put a lot of pressure on many retailers in Winnipeg, but overall small business owners have survived in such a challenging environment.
“I think in Winnipeg no different than across the country, full service restaurants, the fitness industry, those have been absolutely decimated and I believe that many of those won’t be back or won’t recover,” said Kris Mutcher, VP Retail for Colliers International in Winnipeg.
“But I’ve been shocked that we haven’t had more failures and more vacancy come up. Our vacancy numbers continue to drop in the market and largely that’s due to the federal supports that have been put in place to help keep tenants afloat where in many scenarios 90 per cent of your rent is covered – that helps a lot.”
Mutcher said that a year ago he would have predicted that there would be an increase in retail vacancy of five to 10 per cent instead of it continuing to drop.
“We’re below five per cent in the market right now and that’s as low as we’ve been in the last decade,” he said.
“Because of the supports that are there, businesses are keeping their doors open and they’re staying current on their rents. And the other thing is traditionally retail has always felt pressures from the new opportunity, the new shiny box of pulling people out of the old and into the new and we’ve seen virtually no construction.
“So with less larger anchor tenants out active in the market and construction prices going through the roof and obviously the overall hesitancy given the climate of what’s going on right now, there’s been very, very limited new construction which is usually one of the major pressures on vacancy because retail in Manitoba and in Canada over the last 20 years there’s always something new, there’s always some new centre, there’s always somewhere new to go. The amount of square feet of retail space has been constantly growing and I think COVID has put a bit of a stop on that which has helped to control the vacancy.”
According to a report by Colliers on the sector, the Winnipeg retail sector closed 2020 with many challenges and mixed messages while certain essential uses and quick serve restaurants thrived, others such as fitness facilities and service-based retailers suffered. In 2020, the retail vacancy rate in Winnipeg experienced a surprising decrease of 1.2 per cent to finish the year at 5.3 per cent based on the inventory tracked in the Colliers Retail Market Survey.
“As we work through a return to normal in 2021 these support programs may fall away, and vacancy rates are expected to rise as tenants work to adapt to the rapid change seen across the retail sector,” said the report. “Regional malls were a major driver in the decrease in vacancy due to additions of large format stores such as Winners, Marshalls, and GoodLife at St. Vital Centre, EQ3, a full floor call centre at Polo Park and the redevelopment of Kildonan Place, with Save-On-Foods backfilling part of the vacant Sears tenancy.
“Power centres also decreased in vacancy by shifting their leasing strategy and completing deals with service-based retail, fitness, cannabis, discount retailers or other non-traditional uses that were not typical tenants a few years ago. The addition of these non-traditional categories pushed average rental rates down and with limited new supply being built, power centres posed an attractive option for tenants looking to relocate. Tenants now find it desirable at the end of their lease terms to consider relocating to new premises or other vacancies and receive significant contributions towards building out their new store. This has allowed strong desirable tenants to reposition, “right size” and in some cases consolidate store counts, allowing for current prototype store finishes.
“The cannabis market was active across Manitoba as the provincial government entered into a new phase of expanding licensing for smaller-scale cannabis retailers in Q3 2020. The focus of this second phase was on local and independent retailers while limiting the further issuing of licenses to national brands that have already established themselves in the market. As we move into 2021, the cannabis sector will continue to establish itself and mature as the market is expected to stabilize after what has been a busy pipeline of openings over the past few years.”
Colliers said the grocery sector continued to be very active in 2020 with significant investments in store renovations, re-branding and new store commitments. Safeway /Sobeys completed substantial renovations and storefront upgrades to five locations in Winnipeg and could potentially see two others renovated in 2021. In addition, Safeway / Sobeys started conversions of three of its locations to its Freshco Brand. Co-op completed a new store in St. Norbert and started construction on a new store at the Seasons development, added the report.
It said Save-On-Foods continues to expand its presence in the Winnipeg market with two new stores under construction in a partial conversion of a Sears store at Kildonan Place as well as a conversion of an existing building at Pembina Crossing.
“It’s easy to get to the negative of a lot of this,” said Mutcher of the past year or so and its challenges. “But it’s been unbelievable the resiliency and the ingenuity that a lot of the operators and retailers have had and have found ways to make it through this.”