With most public health mandates eliminated and employees returning to the office, the Vancouver retail market is continuing to blossom.
“Asking retail rents have continued to trend upwards, currently at one of their highest levels in many years. During the pandemic, rents on average have continued to moderately grow. Along with asking rents, we are seeing an increase in effective rents as economic and employment growth gains momentum,” said the report.
“The trend to move in remains stronger than the trend to move out. The cumulative net absorption has been positive over the quarters following the start of the pandemic. Neighbourhood centres and general retail contributed most to the positive net absorption. We expect retailers will look beyond these property types as more shoppers expand their trading area and return to shopping centres.
“The retail space became tighter as the availability rate in Q1 2022 dropped below two per cent for the first time since the start of the pandemic. Tenants are more comfortable occupying space now, as they realize they can still thrive while living with COVID-19.”
Total Inventory in the market is 123.6 million square feet with one million square feet under construction. Availability climbed from 1.7 per cent in 2019 to 2.8 per cent in 2020 and now back down to 1.9 per cent.
“We didn’t see the fallout like everybody anticipated was coming. Vancouver is situated where you have streets like West Fourth, South Granville that are outside the downtown, and those streets actually outperformed years past,” he said. “Everybody was out walking the streets, grabbing their coffees, everybody needed a break from working and sitting at their computer at home. The retail sales grew as did demand. And the lease rates have gone up.
“These retailers like to flock together. So there’s lots of new to market brands that want to come to Vancouver and while downtown Vancouver is on their target list and some of the traffic is back to where it was, they seem to be gravitating to West Fourth and driving up the lease rates. Basic supply and demand.”
The JLL report said total inventory has seen a trend upwards as development projects are continuously being undertaken. Notable malls including Oakridge Centre, The Amazing Brentwood, and The City of Lougheed are poised to bring millions of square feet of retail space to the market in the coming years as they complete their phased developments. As retailers continue to seek out spaces for their businesses, inventory will continue to deplete as soon as they arrive on the market, said the report.
Thomas said the only real vacancy the market saw in the past couple of years was in the downtown and the market downtown has started to pick up as people return to the office, cruise ships return and tourists are coming back.
“A year ago, you could walk up and down Robson Street and you would see a number of for lease signs but slowly those are all being absorbed.”
Thomas said the bright spots right now in the retail sector are the categories of athleisure and discount stores. The home improvement sector also really took off during the pandemic but that has tapered off now as people have returned to office. The sporting goods stores have also done well.
Thomas said the interest from international players remains. In 2019, the market was quite busy with international groups looking to make their foray into the country and they typically like to enter Vancouver or Toronto.
“A lot of those plans were put on hold. Most of those retailers are starting to tour again. They’re able to fly again to the country. It’s a lot easier than it was a year ago. We’ve actually done a number of deals, new to market international retailers, opening up in Vancouver,” he said.
“We did the Allbirds deal. They’re opening up in June on West Fourth Avenue. That was a pandemic deal. There’s a couple more. The deals are signed but they want to make their own big announcements first. Two of them will be on Robson Street. Flagship deals on Robson Street which will be announced shortly.”
With EV becoming the modern-day trend, many automobile makers are looking to showcase their new EV models in prominent, high traffic spaces. Following in the footsteps of Tesla, all major car makers are trying to get ahead of the race and quickly enter the highly competitive market, said the JLL report.
“As e-commerce continues to grow, grocery stores are the next to enter this lucrative space. Following in the footsteps of Fresh Prep and Goodfood (both provide meal prep delivery kits) who started the online grocery trend, Sobeys, Aisle, Tiggy, Spud, and Instacart are also gearing up to start or build upon their already existing e-commerce services in Vancouver. These companies range from delivery and meal prep services to 24/7 contactless grocers. Retailers and shopping centres are now having to put greater emphasis on their physical spaces to recapture the market share that online shopping has disrupted,” it said.
“As workers begin to return to the office to bring back that collaborative environment that has been missed for the past two years, downtown retailers near office spaces could expect to see a boost in sales. Foot traffic in the downtown core has seen a gradual increase. The new work-from-home and hybrid work model is yet to be defined, but as most companies have realized, being in person and working with your team boosts creativity while building collaborative and social skills.
“Shopping centres have reverted to triple net rents after having switched to percentage rent during the pandemic, when they closed their doors temporarily due to poor business conditions. Foot traffic is on track to return to normal pre-pandemic levels and shoppers are spending more time in malls.”