Stability seems to be the prevailing theme for retail in Vancouver as demand for warm shell spaces remains strong but the pipeline for new supply is experiencing delays, according to the Greater Vancouver Retail Report Fall/Winter 2024 released by commercial real estate firm Colliers.
“Despite uncertainties looming in the market and rising operational costs, entrepreneurs remain hopeful as franchises and new businesses push forward taking up spaces with low overhead costs in short order,” said the report.
“Shoppers and businesses alike have felt the pressure of decreased discretionary spending with business insolvencies up by 16% Year-over- year across Canada according to to the Government of Canada’s Office of the Superintendent of Bankruptcy (OSB)’s 2023-2024 Annual Report. 2025 is poised to be a year of speculation as numerous factors from political matters to prospects of punitive tariffs loom in the back of everyone’s mind.”
As of the end of 2024 the Urban Retail Colliers Index Vacancy Rate was 3.4%, unchanged from the mid-year 2024 figures. Meanwhile, the Suburban Retail Colliers Index Vacancy Rate was 0.7%, slightly lower than 1.0% from mid-year 2024.
Susan Thompson, Associate Director, Research at Colliers, said the key takeaway from the report is that the Vancouver retail market overall remains very healthy and has found its new point of stability following some serious change that occurred during the pandemic.
“The big strengths in the retail market are people still need to shop, particularly necessity-based. So that would be things like groceries, food, things like drugstores. That would be like Shoppers Drug Mart or Rexall. Healthcare. That’s a big thing taking up retail. People still want to be able to grab a quick bite to eat or find something to do. So we’re seeing a lot of quick service retail and those retailtainment are really taking up a lot of spots now because people have realized that people don’t just want to buy things. They want to buy experiences. They want to get out of the house and do things. And so if you can capture all of that in a nice dense location, it creates quite the community.”
Thompson said the 3.4% overall vacancy remains relatively low in the market. The market is still considered to be relatively tight.
“You’d need a little bit of vacancy in the market for companies to grow, expand, relocate into the market as new options. So this is still restricting some of that movement,” she explained.
“New retail in Vancouver is predominantly part of mixed-use buildings or master-planned communities because there’s such a scarcity of land, developable land sites So Vancouver keeps trying to densify. Wiith the housing market being a little slower right now that has also slowed the pipeline of new retail options. That’s making putting some additional pressure on those ones that are starting to hit the market right now.”
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Thompson said there’s some uncertainty out there. There’s a lot of question marks on a number of fronts, be it political or economic, but the population is still growing, even if it’s going to be growing at a slower rate than it was before.
“It’s still growing. People still need to shop and set up their houses. And continue to do their day to day. And there are still entrepreneurs out there who want to get started in this business. And the next big retailer could be starting today. I’s always exciting in retail because you never know what’s going to be the next great success story because they all come from very small, humble beginnings. We’re expecting to see, it’s going to continue.”
New levels of stability in the market
“The Greater Vancouver retail market appears to have found new levels of stability after seeing a divergence between urban and suburban locations during the early recovery phase of the pandemic. As recently as 2022 the gap in vacancy rates between urban and suburban locations was around half a percent. However, as new patterns emerged because of people shopping closer to home, the gap has widened to almost three percentage points, with suburban rates now trending lower than urban rates,” said the Colliers report.
“With a heavy air of uncertainty, deals find themselves teetering to and fro. As costs continue to inch upwards from rents, to labour, permits, taxes, and the time it takes to navigate all these processes it can be incredibly daunting for business owners to sign off and accept all the risks involved with such an endeavour. However, entrepreneurial spirit runs high, and people continue to start new businesses or buy franchises with dreams of success and belief in their business plan. Every successful business was once a startup, and the next great retail could be opening for the first time today.
“Demand for space remains strong among quick-service restaurants (QSR), necessity-based shopping (grocery stores, retail pharmacies), healthcare/medical, convenience stores, and discount/low-price retailers. Desirable locations and well-designed space lease up quickly, especially if they require minimal buildout or finishing. Warm shell space (a rentable area that is ready for a tenant to move in and customize) is highly desirable versus unfinished space due to the costs required and the difficulty many businesses have in visualizing what it may look like.”
Colliers said spaces already fitted out for restaurants with venting and kitchens remain in high demand due to the costs associated with building these elements from scratch. Upward pressure remains in place for rental rates on top quality locations, while other areas have stabilized over the last year, while the time it takes to complete a deal negotiation depends entirely on the complexity of the transaction and players involved.
“Predicting what is going to happen in 2025 is difficult. There are a great many uncertainties hanging over the market that we will have to wait and see how they play out. Political turmoil, provincially, nationally, and globally must be acknowledged,” explained the report.
“The prospect of punitive tariffs affecting the cost and flow of goods across international borders has brought in concerns around business costs and the price of goods rising across Canada. While inflation and interest rates above long-term averages have affected costs, less money is also coming in from shoppers.
“Changes to immigration policy will slow population growth but should slow inflation. Further cuts to interest rates are expected in the near term, but rapid changes in economic conditions could affect this. Expect change.”
Flowing directly from the slowdown in population growth and sluggish economy, the residential housing market in the Greater Vancouver area directly affects the supply of new retail space, noted the Colliers report.
“Due to the scarcity of developable sites, most new retail is developed as part of mixed-use projects or master-planned communities. A slowdown in both the sale and rental of housing along with a stalled investment market, the volume of new housing projects is down. According to the Canada Mortgage and Housing Corporation (CMHC) Starts and Completion Survey for November 2024, year-to-date housing starts are down 14% year- over-year in the Vancouver metropolitan area. This slowdown in new supply is driving up competition for the few sites coming available adding to upward pressure on rental rates and making it harder for new entrants to get a foothold.
Retailtainment a significant occupier of space
“Retailtainment (aka: Indoor recreation or recreation businesses) have become a significant occupier of retail space – think pickleball, trampoline parks, skateboard facilities, gymnastics, kids play parks, VR/video arcades, simulators, indoor rock climbing, and axe throwing just to scratch the surface. People are searching for experiences and entertainment as much as they are shopping and bringing those elements together creates an environment where people want to stay longer and return to more frequently. Expect to see more businesses catering to people looking for something exciting to do or want to try new experiences.
“One thing to watch in downtown will be the increasing implementation of mandates calling workers back to the office. All eyes are watching companies such as Amazon, JPMorgan, Dell, and the Canadian federal government who have made public announcements about their minimum requirements for days in office – often four or five days a week. Urban retail streets in the downtown area have had higher than average vacancy since the start of the pandemic, due to reduced foot traffic. This increase to downtown foot traffic has the potential to drive up demand for local food and beverage offerings as well as shopping breathing much needed vibrancy back into the area.”
Colliers said event-driven shopping is also something the Vancouver market has grown to live for and love. The Olympic Games in 2010, high profile warehouse sales, and annual Black Friday sales have drawn people to head out of their homes, causing noticeable spending spikes. The recent final stop on Taylor Swift’s Eras tour December 6-8th, 2024 caused a 154% increase in spending levels during the run of shows according to data commissioned by the Downtown Vancouver Business Association from payment processing firm Moneris – similar to spending patterns seen during the 2010 Winter Olympic Games. The upcoming Invictus Games February 8-16, 2025, and FIFA World Cup matches June 13-July 7, 2026, will be events that may cause similar spikes in spending.
Related Retail Insider stories:
- Martin Moriarty on Downtown Vancouver Retail Trends
- Taylor Swift Concerts Boost Vancouver Retail: Moneris
