The Vancouver retail market remains one of the most resilient in the country, perhaps the most resilient, says a first quarter report by commercial real estate firm JLL.
“The prospects for Vancouver post-pandemic remain bright. Its population will grow by more than one-third in the next generation, adding one million residents. The region remains Canada’s second most attractive for immigration, with the highest immigrant retention rate of any metropolitan area,” said the report. Vacancy rates are also low with a 1.9% vacancy rate in the first quarter of 2022, compared to 2.5% in the first quarter of 2021.
“While there is a strong need to build to accommodate this growth, this is an opportunity for retail development, especially within walking distance of homes. Vancouver withstood the pandemic gracefully. Retail sales in Vancouver fared better than in other major markets. Highly connected, Vancouver supported the acceleration of e-commerce and adoption of hybrid shopping.”
Scott Lee, Executive Vice President, JLL, said overall retail is slowly finding its footing.
“I think it’s better in some areas and still going to take some time in recovery in other areas,” he said.
“(The downtown) seemingly felt better than other markets. We weren’t as locked down as in Quebec and Ontario. I think that’s the biggest thing. I did personally travel to Toronto and Montreal during COVID and it was very much a ghost town in those peak times of COVID versus Vancouver. We don’t have an underground system per se, we have a very limited one.
“So there was activity on the street, obviously not as much activity as we would normally see, but more than the other markets.”
The JLL report said digital natives took notice of the local social-media engagement and are opening flagships to enhance the retail experience.
“Although office workers, tourists, and students abandoned the downtown area during the peak of the pandemic, Gastown is once again looking up as workers trickle back to the office, cruise ships dock again, and in-person classes resume. In the meantime, shoppers stayed closer to their homes and West 4th, a prime suburban corridor, increased in popularity,” it said.
With strong provincial support, Vancouver quickly became a destination for electric vehicles (EVs). Auto makers VinFast, Polestar, and Lucid recently identified Vancouver as a key market.
“Luxury retail has held up well, and we might be reaching the point where brands look for alternatives to Alberni Street,” added the JLL report. “Asians continue to influence Vancouver greatly, and Asian brands arrive in Vancouver before expanding to the rest of Canada. Chinese have an especially strong preference for luxury and e-commerce. According to Vivintel, more than 60 million Chinese adults are considering immigration to Canada. International retailers continue to choose Vancouver as a landing hub in Canada. Emerging categories include athleisure, optical, and outdoor.”
Vancouver has grown into a luxury hub in North America, said JLL, adding that many saw an opportunity to develop a retail market to target foreign visitors, especially those coming from Asia. By 2025, Chinese consumers are set to become the dominant nationality for luxury, growing to represent 40 to 45 per cent of global purchases.
“Per Klarna’s latest research, luxury shoppers prefer traditional brick-and-mortar for buying most product categories. Only two in five shoppers who bought luxury products last year did so online, and 84 per cent of luxury shoppers consider touching and seeing a product essential to the luxury-shopping experience. While many have expanded their e-commerce operations, retailers will continue to rely largely on in-store shoppers,” explained JLL.
“Despite being expensive within Canada, lease rates in Vancouver are still lower than those in Europe ‒ making space reasonably priced in the eyes of international retailers. At one of the highest rates in Canada, one square foot on Alberni Street can reach $275, but on Paris’s Avenue des Champs-Elysées the cost is upwards of $1,200.
“Bain & Company reported that in 2021 luxury brands continued to increase control over distribution, with a rise in directly operated channels. The direct retail channel for brands has grown to the point that it now accounts for almost half the market and is poised to overtake the wholesale channel.”
Luxury retail continues to expand on Alberni with the addition of two premium jewelry brands: watch brand Tudor and jewelry brand Chopard, both operated by local licensee Global Watch Company. Italian luxury brand Gucci will renovate and expand its standalone downtown Vancouver store at the Fairmont Hotel Vancouver, annexing space formerly occupied by watch brand Omega. A new Omega boutique is now under construction in the hotel across the hall to replace it.
“Today, Alberni Street concentrates most of the luxury names in the city, including Tiffany & Co., Jimmy Choo, Van Cleef & Arpels, IWC, Panerai, Vacheron Contantin, Montblanc, De Beers, Hublot, Prada, and Burberry. However, luxury or upscale branded retail is also flourishing in other parts of the city,” added the report.
“The McArthurGlen Designer Outlets at Vancouver International Airport added several premium brands this summer, including Burberry, Max Mara, Blubird, Matt & Nat, Rossignol, Herschel Supply Company, and Tory Burch. McArthurGlen is following the footsteps of luxury-heavy Toronto Premium Outlets in Halton Hills, Ontario.”
JLL said fewer restrictions and higher mobility have contributed to a better retail environment during the pandemic, and Vancouver has had the best retail performance within major markets since the start of the pandemic. Retail sales in 2021 increased by 14 per cent compared with 2019, and by 17 per cent compared with 2020.
And population growth will fuel that continued growth in retail sales. JLL said Greater Vancouver is looking to add one million residents over the next 28 years for a total population of 3.8 million.
“To reach this milestone, half-a-million housing units and just as many jobs will need to be created, as well as 40 million square feet of retail space. In 2050, Greater Vancouver expects to hold 1.6 million dwelling units, 1.9 million jobs, and 160 million square feet of retail,” said the commercial real estate company.
“Greater Vancouver projects it will gain 30,000 to 40,000 net immigrants per year, which accounts for almost 70 per cent of the population growth. In the short term, this figure is adjusted to the updated federal immigration plans, and over the longer term it is assumed to steadily increase at an annual growth rate.
“If current trends prevail, most of this growth will be in the areas of South of Fraser – East, where the population will climb from about 783,000 today to nearly 1.2 million in 2050.”
Vancouver has always suffered from lower retail square footage per capita vs other cities. That reason and its density helps retailer sales productivity. Thankfully some huge projects are underway: The Amazing Brentwood (phase 1 open), Oakridge, The City of Lougheed, Gilmore Place and The Post will alone add about 4 million sqft of new/replaced retail to the market. McArhtur Glen Outlet will also open a phase 3 in the medium term. Metropolis at Metrotown will redevelop the vacant Sears into a large mixed use project with significant retail at ground level. I enjoy following the progress of these huge developments.