Retail leasing across Canada continues to show strength, with high occupancy and growing demand from necessity-based and traffic-driving retailers, according to Moshe Batalion, Vice-President of Leasing – National at RioCan.
Asked to provide a national perspective on leasing, Batalion emphasized market tightness and minimal new supply. “The current market conditions remain tight. The market remains a very competitive market. We’re seeing rents continue to rise just given that very little retail is being built.”
When asked about new construction, Batalion confirmed, “New construction for the most part is muted.” This, he added, is “across the country.”
On the development front, RioCan is focused on ongoing projects rather than new builds. “Brand new projects? No. We’ve got out in Calgary East Hills,” he said. “We’ve built out a number of phases and we’re working on building out a few other. There’s a lot of demand in that project particularly.”
In Ontario, the company is seeing similar traction. “We’ve also got a project in North Oshawa called Windfield Farms. We built out about 350,000 square feet already. And again, much like East Hills, a lot of interest in us building more there.”
When asked about which segments are showing the most growth, Batalion pointed to staples. “Right now the necessity-based retailers, basically groceries, pharmacies, banks. We’re seeing a lot of expansion there. And those are really the tenants that we’re focusing on.”
He added, “And then you’re also seeing, you the traffic driving tenants, like fashion, home goods, fitness. Definitely. There’s a lot of appetite from those tenants.”
Quick-service restaurants (QSRs) are also making waves. “QSR drives a lot of traffic,” said Batalion.
Asked about regional differences in strength, Batalion was clear: “I think right now all pockets are, are extremely strong. If you look at our occupancy rate, we’re at an almost an all-time high. We’re 97.5, and so all markets are kind of in that 97 and above occupied.”
Recently, RioCan Real Estate Investment Trust announced it was cutting financial ties to five properties held in its joint venture Hudson’s Bay.
Those properties were the Square One Shopping Centre in Mississauga, Ont., Scarborough Town Centre in Toronto, the downtown Calgary HBC store, and the Carrefour Laval and Promenades St-Bruno locations in Quebec.
On the topic of the ongoing situation regarding HBC properties, Batalion kept within the bounds of public disclosure.
“With us being in front of the courts right now, I really can’t say much other than what you know, has already been disclosed on our earnings call.”
However, he did add: “We will only allocate capital to those buildings where we can demonstrate an acceptable return on investment. My team is actively pursuing backfill solutions for several of the locations that are already in the RioCan operating portfolio. But given the expertise of my team and the strength of our relationships with the retail tenants, we’re well positioned to secure suitable replacement tenants for those properties. And there is considerable interest.
“I can also say that those rents that were paid by HBC were well below market.”
Batalion also pointed to a major industry shift worth watching: the plateau of e-commerce. “The one thing we have seen is that e-commerce has plateaued, really making retail a hybrid of online and physical shopping. Tenants have realized they now need to expand their physical locations alongside their digital presence. So I think that is a key and very important to our business right now.”
Related Retail Insider stories:
