The Vancouver retail market is seeing increased demand even with economic uncertainty. Limited availability and rising rents are driving retailers to secure leases quickly, says a new market report by commercial real estate firm JLL.
Although retail sales have decelerated, some growth is expected in 2024, supported by a growing local tech sector and resilient consumer spending. Transit ridership, the opening of new concepts at Amazon’s The Post, and the rapid recovery of tourism continue to support the recovery of downtown Vancouver, added the report.
Trevor Thomas, Senior Vice President with JLL, said the retail market in Vancouver continues to be very resilient and the outlook is positive.
“I read some stats the other day that the downtown and suburban office vacancy rates continue to fall – 10 and eight per cent respectively. The ridership on public transportation is one of the highest in all the major cities which tells us that more and more people are out and about which of course bodes well for retail in general,” said Thomas.
“Vancouverites definitely tend to spend. It’s a very diverse population and retailers are not blind to that, know the market well and have some of the highest sales in their portfolios in Vancouver.”
Tourism is back too.
“The city is vibrant. The cruise ships are back. The weather’s improved. Overall I think everything is going as well as it could for Vancouver right now,” added Thomas.
“One thing that I’m noticing also one of the trends is while athleisure has always dominated the retail trends for the last few years, I think this is starting to cool off a little bit and we’re starting to see a shift towards the aspirational category, given lots of tourists and activity in the market. It’s their time to shine.
“Demand is still outpacing supply . . . Retail continues to be resilient. Landlords are still expecting growth in leasing activity this year. However, retailers are a little bit more conscious because both operating costs and profitability remain a concern with all these rising costs. So I think it’s safe to assume that the lease rates are starting to stabilize a little bit after accelerating growth over the last few years.”
Check out the latest Yaletown views in downtown Vancouver at the SideSignal Collective.
The Vancouver retail leasing market has been thriving, with significant rental growth over the past five years. Demand for retail space has outpaced supply, as evidenced by increased net absorption in 2023, said the JLL report.
“However, leasing volumes have gradually declined since their peak in 2022 as retailers face a softer outlook for consumer spending and a scarcity of premium spaces,” said JLL.
“Vancouver remains an important hub for Canadian-based and international businesses. Retailers in the athletic, outdoor, and fashion sectors – including Adidas, JD Sports, Kit & Ace, and Esprit – have made expansion announcements. Sustained demand has driven rental growth, but more recently inflation and rising property taxes have also been contributing factors, as landlords pass these additional costs on to tenants.
“Construction activity has focused on the redevelopment of malls. The 1.2 million square foot Oakridge Park is scheduled for completion in spring 2025 and will feature a luxury component and the second Time Out Market in Canada.”
While most space absorption has concentrated in general retail and neighbourhood centres, mixed-use retail spaces should see a significant increase in absorption, said JLL.
“Vancouver’s retail market is performing well, marked by limited availability and surging rents. Sustained demand is prompting retailers to secure leases quickly, and limited new construction activity is expected to keep the market tight,” explained the report.
“Despite the deceleration of retail sales growth and a softer housing sector, Vancouver’s retail market remains in demand due to its fast-recovering downtown area and a flourishing local tech sector. The opening announcements of The Post in the downtown area and Oakridge Park in the suburbs are expected to sustain the market’s momentum.
Looking ahead, the long-term prospects for Vancouver’s retail real estate market remain strong. The city’s high number of immigrants and its role as a hub for international retail concepts contribute to the positive outlook.”
The report said retail sales in Vancouver have shown a downward trend in recent years, although some real growth is predicted for 2024. While home improvement, home furnishings, and jewelry are out of favour, an appetite for electronics, shoes, and clothing has emerged.
“A weaker housing market has softened the economic outlook for Vancouver, but prospects for consumer spending remain positive. The city benefits from an influx of immigrants, a recent boom in the local technology sector, and positive prospects for employment growth,” said JLL.
“Full-service and limited-service restaurants have outperformed retail goods and are expected to continue growing, but at a decelerated rate in the single digits. This suggests that dining experiences remain relatively strong despite an overall retail-sales deceleration.”
