Crombie, Executive Managing Director, Retail Services Canada, Cushman & Wakefield, was speaking at a session entitled “A Look at How Trends Today Are Shaping the Future of Retail.”
Crombie has identified the following six retail trends the industry and consumers should watch out for in 2023:
- Although we expect to see slight declines in retail sales over the next few years, the Canadian consumer currently remains resilient despite higher interest rates and continues to spend;
- Omni-channel is the future of retail whereby retailers will invest in both physical stores and e-commerce to best service its customers on multiple platforms. Also, more retailers will explore and potentially operate in the Metaverse to gain a larger customer base for selling product;
- Expect landlords and retailers to both employ greater utilization and investments into technology to better service consumers and drive operational efficiencies;
- The retail real estate market is tracking less new construction projects over the next few years, as compared to historic levels, which will likely put upward pressure on rental rates on existing product;
- Although we continue to see closures of the traditional department store, expect to see the revival of experiential retail along with more food offerings, services and entertainment venues in our shopping malls which will drive greater customer traffic; and
- The suburban retail markets remain strong as consumers support their local retail establishments. However urban retail will continue to struggle until we see a significant return of workers back into the office.
Crombie said the Canadian consumer remains resilient.
“In 2022, we were still spending well above 2019, pre-pandemic. So people are pulling out their wallets,” he said. “Holiday spending seemed to be the same as it was the previous year. We are seeing a bit of dip in restaurant spending coming in the new year which is probably not necessarily unexpected.
“I think we’ve been doing well there. That said, we had a huge bounce back in retail spending, retail sales, in 2021 and it’s definitely going to be a little more muted in 2023 but still positive. Projections we had from Moody’s is that year-end 2022 will be 1.8 per cent in terms of sales. Still positive which is good.
“I think retailers have gone through the worst of it through the pandemic. And come recession, it’s taking forever, if any of the real estate assets could survive this better it will be retail because in 2021 and part of 2020 when you’re closed and you’re not making any revenues you had to make some tough decisions. We saw huge levels of store closures. We saw a lot of retailers calling out underperforming sites and so they’ve kind of done a lot of the stuff that traditional companies would do in a recessionary time. Now most retailers and most landlords are in a better position.
“That said, there’s hot spots and not-hot spots. I talk about the suburban market which we continue to see quite strong. And downtown, still with 30 per cent less people in the downtown core that’s affecting the urban retail. So you’ve got a bit of dichotomy happening there.”
Crombie said he feels bullish about the retail industry.
“It’s just natural that our sales are coming down to a more normalized level,” he said. “We’re definitely seeing pretty little inventory coming on and there’s always a natural growth in population, there’s a natural growth in retail spend, and with very little new inventory coming on there, existing product is going to maintain its value and I think retailers won’t have the opportunity to expand as much because there’s not that new development, not that new shiny tenant. I think that’s going to bolster net rents and everything else.
“We’re definitely seeing less retailers expanding these days but a lot of them dipped into their capital reserves to survive the pandemic. It’s more about the quality of the location than the quantity of the locations. As a retailer, if you weren’t expanding you weren’t a retailer. I say that in jest but they were growing for growing sake. But now I’m seeing more discipline in terms of where they want to be and why they want to be there. So they’re looking at the quality of the locations rather than just ‘I need 10 more sites. I’d rather get five good ones or three good ones’. There’s definitely more of a discipline in the market and we’ll see that going forward for sure.”