Sustained demand and decreasing availability are driving Calgary’s retail leasing market, according to a recent report from commercial real estate firm JLL.
The report, Calgary Retail Insight Spring 2024, said Calgary’s retail leasing market remains strong, with steady leasing volume and decreasing availability due to high demand and limited supply.
It said rent growth is starting to show signs of deceleration but is expected to continue to rise, driven by inflation and rising property taxes. Also, Calgary continues to outperform the province, driven by robust consumer spending. Population growth and a positive outlook for the oil industry is supporting long-term prospects.
“Calgary’s retail leasing market remains robust, although rent growth is showing signs of slowing from its peak in mid-2023. However, leasing volumes remain strong, in part due to strong population growth and continued demand for space,” said JLL.
“Despite a decline in net absorption, demand for retail space continues to outstrip supply, resulting in a downward trend in availability. Notably, Alo Yoga, Uniqlo, and Earls have announced mall-based store expansions in the past six months.
“Currently, construction activity is relatively subdued, but we anticipate new space from suburban projects The Alpine and Township (Phase 2). In addition, in 2025 Primaris REIT is set to complete the redevelopment of the former Northland Village Mall into an open-air shopping centre with residential towers.”
The report said the majority of leasing activity in Calgary has concentrated in general retail, neighborhood centres, and malls. CrossIron Mills, CF Market Mall, and CF Chinook have seen significant leasing activity over the past year, with Decathlon, Athleta, Cole Haan, and Knix among the many new retailers opening.
Overall, the retail leasing market in Calgary is expected to experience strong growth in 2024, as availability decreases and rent growth begins to slow, it added.
“Despite a projected decline in Calgary’s retail market this year, the city’s ever-growing population and a favourable outlook for the oil industry should continue to drive consumer spending,” said JLL.
“This year’s outlook for retailers is positive, with Calgary’s retail sales growth exceeding that of the province. Calgarians continue to spend on several types of products and services, with a greater interest in convenience, health care, personal care, and shoes. However, home improvement and furniture expenditure have decreased.
“While the local economy is slowing, it is nonetheless expected to outpace national growth rates. Consumer spending growth will slow this year but not contract. A wave of new residents combined with positive oil-demand prospects over the coming years underpin future developments in this area.”
In 2023, full-service and limited-service restaurants performed better than retail goods across the province. Limited-service restaurants have also had a stable growth pattern and will grow further accordingly, added the commercial real estate firm.
“Calgary’s effort to breathe new life into its downtown is visible through a continual transformation of empty office spaces into residences and a significant decrease in office vacancies,” explained JLL.
“More recently, the Calgary Municipal Land Corporation (CMLC) announced major projects worth over $1 billion at the East End, including mixed-use residential projects, a new theatre at Arts Commons, the grand opening of the BMO Centre expansion, and the Victoria Park/Stampede Station rebuild.
“On another positive note, Calgary’s transit ridership has rebounded to become one of the top-ten busiest public transit systems in North America. In Q3-23, Calgary Transit recovered 79% of its passenger trips of 2019, surpassing Los Angeles, Seattle, and San Francisco.
“The tourism sector in Calgary is set for a strong year, with Tourism Calgary projecting visitor numbers above the 8.4 million experienced in 2023. A majority are Canadians who come for the city’s famous events
like the Stampede, among other factors such as the increasing population of Canada.”
Ron Odagaki, Associate Vice President, Retail at JLL, said all signs in 2023 pointed to retail spending being fairly robust in Calgary.
“Whatever the headwinds talk is these days, what’s keeping strong in my opinion is the fact that supply of retail space, retail inventory we’ll call it, is low,” he said. “So retailers even if they are facing some increased expenses at their end for whatever reason, I think for the most part can’t afford to give up their space or cause vacancy to go up. They’re continuing to renew. They’re continuing to maintain their market share by maintaining their locations. And their good locations.
“So with that vacancy continues to be low and rental rates continue to maintain their strength. The bulk of it is operating costs and property taxes which seem to increase but I think the net rents are stabilizing but for good locations we’re still not seeing any weakness or reductions for rents. We’re continuing to see increases. Maybe less increases than years past. But because of the low supply, demand still continues to outpace.”
Odagaki said over the next couple of years the city may see another increase in construction which will ease the supply issue.
He said downtown Calgary retail has experienced various stages of the return of the office worker over the past few years.
“In 2024, you’ve kind of seen maybe a bit more of that stable baseline as to what that is. I think retailers are starting to see that now and so with that we are starting to see some activity. Retailers asking about some of the vacant spaces that are available,” he said.
“The vacancy rate in office is probably corresponding to that. But more so the number of employees that are returning. The number of swipe cards, the number of people in the elevators, the number of people in the parkade, on buses. As you see that stabilize, retailers now have a better guess as to what they think they can do and more importantly that there is a market in the downtown core to do business. So we’re getting a lot more interest in retailers looking at the downtown core as an opportunity to do business. It’s been more optimistic than I’ve seen in a long time which is a good sign.”
