As Canada’s economy shows signs of stabilizing with easing inflation and potential rate cuts, the retail sector is navigating a mix of opportunities and challenges, says an executive for real estate company Colliers.
While consumers remain cautious, there are notable shifts in the market – from booming categories like food and beverage to challenges such as declining employment and spending in certain segments. These trends reflect the evolving dynamics shaping the retail industry.
Adam Jacobs, Head of Research at Colliers Canada, said that on the macro side, it looks a little negative in a lot of ways. The job market’s getting weaker. Unemployment is up again.
“Retail sales are not dropping but they haven’t really gone up and then we’re seeing these stories about the government is really going to pull back on immigration. They’ve kind of gone too far, they have to reduce it in the next couple years. That all sounds negative, but I just went to this big industry conference and on the investment side retail is kind of rocking and rolling.
“There’s a lot of interest in retail. There’ve been a lot of deals. There’ve been a lot of major enclosed malls sold . . . Altus does this investment survey, what do you want to buy? What do you want to sell? And the number one thing people wanted to buy wasn’t apartments, it wasn’t suburban warehouses. It was grocery-anchored retail because it’s just seen as risk-free. There’s no downside. You have a tenant who’s going to be there forever. You’re going to be fully leased all the time.”
Jacobs said that on the investment side people seem pretty positive on retail.
“The thing about retail is we kind of don’t build it anymore. It takes so much land that it’s so expensive. If you have an existing asset, then there’s no competition. Nobody’s going build a better mall right down the road from you, and then you lose a lot of value. If you have one right now, you’re sitting there, you’re looking at a growing population, and even if retail sales are flat, you’re still in a pretty good situation,” added Jacobs.
Jacobs said there are some positive things happening like inflation coming down.
Foot traffic healthy in Canadian shopping centres
The food and beverage industry is one segment of the retail sector that is thriving with more restaurants opening and more brands coming to Canada. The foot traffic for coffee shops, donuts, pizza, burger joints is up for all of those.
Jacobs said much of the recent population growth in Canada has been young people, fueling the growth in the food and beverage industry.
And while online retail sales have grown in recent years, suggesting physical stores might be in trouble, that’s not happened.
“The death of the mall was way overstated and it’s certainly back,” said Jacobs.
“There’s more people walking in the mall and coming through the door and maybe they’re not spending quite as much . . . . but if you’re a retailer it still translates to sales and interest. The thing we’re kind of keeping an eye on is there have been all these announcements about we’re really going pull back on immigration and I completely understand why in terms of it’s causing a strain on infrastructure and healthcare and all the traffic and everything but we’ve gotten pretty used to the population just grows gradually and so that if you’re in grocery or food it’s just like every year I wake up and there’s more customers and more people who need me. And it’ll be interesting to see what happens when that maybe stalls for a while.”
