Headlines proclaiming the end of retail as we know it persisted nearly as long as the COVID-19 virus itself, but a fall report by commercial real estate firm Avison Young says foot traffic and retail sales volumes are returning to, or even exceeding, pre-pandemic levels.
“Retail inventory in Edmonton has stabilized with the smallest observed quarter-over-quarter increase since 2016. Vacancy, on the other hand, showed the most dramatic decrease since the pandemic began in Q1 2020; expect this metric to remain variable over the short-term. The pandemic forced evolution onto retailers, but government support mitigated the immediate impacts of evaporating demand. Small businesses that struggled the most may finally be closing, whereas groups or start-ups who used the pandemic as an incubator are beginning to enter the market,” said the report.
“Overall, retail spending in Alberta has exceeded pre-pandemic levels and continues to climb. Inflation certainly plays a role in this; however, it is clear that demand for tourism and travel, clothing for work or play, and recreational activities are being prioritized after years without. Conversely, demand for building and garden materials and take-out food has fallen because consumers are no longer restricted to their residence. This shift in spending patterns is simply a return to traditional retail fundamentals. With September and back-to-school on the horizon, along with the gradual increase of social events and celebrations, we expect demand for food and beverage and restaurants to increase consistently towards the end of 2022 and beyond.
“It should come as no surprise that many American retailers view Alberta as the most business-friendly province. As a result, many franchises are comfortable with the sheltered risks Edmonton market provides. So why does Calgary not seem to enjoy this luxury to the same extent? With vacancy and per-capita income essentially the same, Edmonton’s success in attracting international franchises can be partly attributed to higher multicultural populations and better rental rates. Additionally, West Edmonton Mall can afford up and coming retailers unparalleled exposure, particularly once it connects more consumers by light rail transit.”
Ben Volorney, Principal, Avison Young with the Edmonton retail team, said the city is currently in a very strong position.
“Edmonton has an advantage and always has had an advantage by having a strong demographic, high income levels, compared with a relatively low cost of living versus other major markets,” he said.
“Edmonton’s also been known for a long time as a proving ground for retailers who plant their roots here. There’s a long list of retailers that have gotten their start in Edmonton that a lot of people aren’t aware of. The Edmonton area saw the inception of a lot of retailers including The Brick, Boston Pizza, Booster Juice, Earl’s, Sorrentino’s, Famoso, Canadian Brewhouse and others.
“I think another advantage we’ve got, even pre-pandemic days, spilling into today, the retail universe in Edmonton is actually relatively small. It’s just over 61 million square feet of retail compared to say 124 million square feet of retail in Calgary in markets that are give or take roughly the same size. What that equates to is obviously less retail space per capita and I think that’s relevant because retailers they notice, they’re catching on and it really makes their choice of coming to Edmonton that much easier knowing that even though we have one of the biggest malls in the world, we are under-serviced in a retail perspective.”
Over the last few months, the city has seen first in Canada stores open for California Pizza Kitchen, Dickey’s Barbecue Pit, It’Sugar, Offline by Aerie, and VISH and first in Western Canada stores to open for Wing’n it Express, and P.F. Chang’s.
“Foot traffic is definitely recovering . . . Retail foot traffic in Edmonton is roughly a third higher, 33 per cent higher, than the same time last year,” said Volorney, adding those were June numbers.
“Looking ahead we do foresee foot traffic this fall increasing as people return to the office and big ticket events return to major venues in our market. A lot of this stems from the fact too that retail is evolving and I can say that interior malls also become revitalized as gathering points that are becoming more and more experiential. The days of transaction-only retail are slowly fading away because consumers want to meet up to test, try and taste the next best thing available. So we’re seeing interior malls continue to evolve well beyond traditional retail.
“With this evolution, retailers are going to continue to rely on their online platform, naturally, but a true omni-channel offering is now critical in order to compete and survive in the retail world.”
Volorney said current retail vacancy is about 4.6 per cent in the third quarter of this year. From the first quarter of 2020 to the first quarter of 2022 the Edmonton retail market saw a spike in vacancy from 2.8 per cent to 5.3 per cent, which is substantial.
“I do foresee vacancy rates remaining fairly stable but still trending downward,” he said.