Despite lingering hesitancy around consumer spending, Vancouver’s retail real estate market shows continued activity, and industry experts are expressing optimism for its future.
Factors such as a growing population, strong job market, surge in tourism and companies bringing workers back to the office are resulting in a “robust” retail market, said Trevor Thomas, senior vice president of Jones Lang LaSalle, Inc.’s (JLL) Vancouver retail team.
While consumer spending remains a bit of a question mark, Thomas said he is “optimistic” when it comes to the retail market’s outlook in 2024.
“We’re in a very healthy retail per capita in Vancouver, which keeps the market in balance, keeps it in check. We’re not over-retailed, so there’s always going to be that pent-up demand, just given the lack of supply,” he said.
The Vancouver retail asset class had a total availability rate of 1.8 per cent and an average asking lease rate of $36.93 per square foot as of the end of March, according to a retail market outlook from JLL.
“There’s definitely been a flight to quality and the inventory is shrinking quickly. As a result, the lease rates are forever climbing,” said Thomas.
Areas such as Robson Street, Alberni Street, West 4th Avenue and the South Granville area near the Broadway Corridor are all performing well, he added.
Among these retail districts, the area with the highest vacancy rate is Robson Street, specifically in the area between Thurlow and Bute streets, where the rate sits at at 8.13 per cent, according to a Jan. 24 report by Colliers.
“Where you do see some of the vacancies level off is on the ancillary streets, off of the major blocks and some of those major corridors.… We were all hoping that with all of this demand, some of this would spill over to these areas but that hasn’t necessarily been the case,” said Thomas, adding that retailers are looking for “proven markets.”
However, one expert says he doesn’t agree with this view, or its application to corridors such as West 4th Avenue.
“It’s one of the most popular areas for retailers right now. I think that does bleed into the secondary locations as well,” said Sherman Scott, vice-president of the retail group at Colliers.
The area between Burrard Street and Yew Street in Kitsilano has a vacancy rate of 5.79 per cent, which translates to about 11 locations. The average net rent for this area is $80-$135 per square foot, according to Colliers.
Vancouver’s suburban grocery-anchored shopping centres have a vacancy rate of 0.75 per cent, which translates to 47,188 square feet of space, according to Colliers.
“The recent market, which surprised a lot of people coming out of COVID, has been extremely active. There are lots of people looking for space and there aren’t a lot of options, particularly in the suburban markets,” said Scott.
Vancouver is set to receive 329 cruise ships between March 11 and Oct. 29, 2024. This will translate into a record 1.27 million passengers who would travel through Canada Place in 2024, up 1.6 per cent from the record of 1.25 million passengers last year, according to the Vancouver Fraser Port Authority.
While cruise ship tourism is predicted to be strong this year, cities such as Vancouver and Toronto typically depend on Chinese tourism to boost retail sales.
“Despite an easing of travel restrictions in 2023, the number of flights out of China has yet to return to [pre-pandemic] levels,” said JLL in their retail report.
“There is an impact with the lack of tourism coming in, particularly from China right now into the Lower Mainland. That is having an impact on retail sales,” said Retail Insider owner and consultant Craig Patterson.
“That’s an important shopping demographic, particularly in the Vancouver area for luxury retail.”
Luxury brands are expected to make up roughly 20 per cent of the shopping centre component of Oakridge Park, the Oakridge Centre redevelopment by Westbank Corp. and QuadReal Property Group, according to JLL.
Other developments mentioned by those who spoke to BIV are the Amazing Brentwood in Burnaby thanks to plans by Shape Properties to build 11 residential towers, translating to over 6,000 homes.
Over in Richmond, Cadillac Fairview and Shape Properties are in the process of redeveloping the site of Richmond Centre to add over 2,000 new homes spread across 12 towers.
The densification around these malls and added population base will “only be positive” for the retailers located there, said Thomas.
Amazon.com Inc.’s new office building The Post in downtown Vancouver was also mentioned thanks to its Loblaws City Market, restaurant Fogo de Chão and Evolve Strength fitness gym.
Despite the excitement around these developments, a decrease in consumer spending is seen as the only threat to the robust status of the retail market, according to those who spoke to BIV.
“Spending on furniture, clothing, and other merchandise finished [in the first quarter] on a soft note—as households pared back physical merchandise purchases, buying fewer physical goods in favour of experiences,” said RBC economist Carrie Freestone in an April 15 report on consumer spending.
“We look for Canadian consumer spending to remain soft in the first half of this year before ticking higher in the second half.”
Scott said that consumer spending is a trend that experts and retailers on the ground will be watching closely.
“It’s interesting to watch because at the same time you’re seeing vacancies go down, people’s costs are going up. There’s only so much that consumers are willing to pay for a product or a service,” he said.
“[Retailers] are definitely having to watch their costs in relation to their sales and there’s only so much you can charge a consumer.”
Victoria market sees suburban success
Across the Georgia Straight, suburban demand for retail in Victoria has been very strong “as population growth has been significant,” said Graham Smith, senior vice-president in Colliers’ Victoria office.
The Capital Regional District’s population grew by 3.3 per cent to 457,478 between 2022 and 2023, according to data from BC Stats.
Downtown Victoria’s vacancy rate was at 9.2 per cent as of the fourth quarter of 2023, and the city’s shopping centre vacancy rate at 2.6 per cent, according to the latest data from Colliers.
New growth for Victoria includes a retail component in the master-planned community of Royal Bay, located in the city’s suburb of Colwood.
The retail project is being developed by PCRE Group, which is partnering with GableCraft Homes, the developer of the larger Royal Bay site. PCRE completed the retail project Commons at Royal Bay in 2023 and added 80,000 square feet of retail space.
“They are now starting pre-leasing [of] a second phase, which is 50 per cent pre-leased already,” said Smith.
Developers Seacliff Properties Ltd. and Reliance Properties Ltd. began construction of the master-planned community Beachlands in Colwood in February of this year and “is certain to have good demand,” said Smith.
The project is set to feature 2,800 homes along with a mixture of commercial buildings and retail spaces.
“Supply is definitely limited in the Victoria market, so we expect vacancy to continue to fall and lease rates to continue to climb,” said Smith.
—With a file from Glen Korstrom.
