Retail property in British Columbia is experiencing a post-pandemic resurgence that real estate professionals credit to the sector’s ability to pivot as consumer demand changes.
Projects dedicated to retailers in the province is being bolstered by the success of dense projects where transit is a lynchpin, according to industry professionals. This allows the sector to capitalize on the record population growth in the westernmost province of Canada in recent years, as well as decelerated activity in the residential market.
These factors have combined to lead to major changes to British Columbia's commercial property landscape. “The residential market is pretty much stopped here, so we are seeing a number of sites that were slated for redevelopment now being reimagined,” said Brodie Henrichsen, executive vice president of retail for real estate services firm JLL, who moderated a panel of industry professionals at the recent Vancouver Real Estate Forum.
“You need transit density and you need sustained population growth, and those variables have to line up at the right time,” said Jay de Nance, Choice Properties REIT’s director of leasing for Western Canada. He cited Cariboo Commons in Coquitlam, an 86,079-square-foot mall with 24 retail units, as one of two retail assets the real estate investment trust owns in the province.
“There’s still an opportunity for densification there, but we’ve got a good retail strip that we can reinvest in," he said. “We can get some great NOI [net operating income] on our site, and then we have future phases that we can pivot — Pinetree Village Shopping Centre is another example; it’s a really strong asset for us, and we’ve got a great anchor,” Nance continued.
The panel, "Retail resurgence: what is the story behind the growing demand in the region?" also included Lauren Elliot, vice president of commercial leasing at Shape Properties Corp.; Michael Penalosa, principal at Vamos Development Advisors Ltd.; and Brian Wong, Pattison Food Group’s managing director of real estate.
Shift to necessity retail
The retail renaissance in British Columbia is also underpinned by the sector’s move toward more drug stores, grocery stores and other retailers where people get the necessary goods they need, such as food and medicine. They're becoming highly visible in Vancouver as their inclusion in mixed-use developments increases, Penalosa said.
“These megaprojects will continue to define our skyline,” he said. “Necessity-based retail, focused on experience and convenience, are going to have the most promising performance.”
Grocery chains are among the necessity-based retailers having the biggest impact on market demand. Loblaws — one of Canada’s so-called Big Five grocers with Sobeys, Metro, Walmart and Costco — said in February it will invest $2.4 billion to open 70 new stores, including pharmacies and expand its discount grocery subsidiaries, No Frills and Maxi, across the country this year. The investment is part of the grocer’s plan to spend $10 billion on expanding and remodeling stores, as well as building distribution centres, over the next four years.
JLL's Henrichsen said Canada’s grocery expansion is being driven by discount brands. However, addressing Wong, he asked whether the growth will be sustainable in the long run. Wong responded affirmatively.
“It’s been driven by population growth, immigration,” Wong said, citing record population growth of 1.27 million people in 2023, and adding that much of the grocery expansion was planned “before the federal government turned off the taps” on immigration.
But Wong also said robust interprovincial migration in Western Canada remains a salient fundamental expected to buttress the rapid growth of brick-and-mortar grocery stores.
“Alberta is still growing by leaps and bounds, and that’s where the bulk of these new grocery stores are landing: in these master-planned communities throughout Alberta, where there are three or 4,000 residents,” Wong said. “When they’re built out, they’ll be community commercial hubs at their cores.”
Stores getting smaller
The size of retail units are shrinking, albeit for efficiency and balance-sheet reasons. Gone are the days of stores in excess of 100,000 square feet, panelists said. Footprints have shrunk to roughly a third, largely due to the obsolescence of stockrooms.
“Our prototype today is about 32,000 to 34,000 square feet,” Wong said of grocery stores. “Back in the day when shoe stores were 24 [thousand] to 26,000 square feet, there would be a stock room, and the other half would be what you’d have on the floor.”
This is especially apparent in shopping malls, he said.
“Now you can go to any shoe store in any shopping centre, and it’s 1,200 square feet, no stock room, and what you see on the floor is what you have available. The business has become more efficient because it had to, and that’s because the costs were just astronomical,” Wong said. “What we put into a 34,000-square-foot store, if we had to scale that up to a 75,000-square-foot store, we’d never make any money.”
Elliot said that shuttered big-box retailers have left a gap in the market, and in areas like downtown Vancouver, that presents a unique opportunity for retailers to fill vacancies in ways that can benefit the entire community. Last year, iconic retail Hudson's Bay Co. liquidated its assets and closed all of its stores.
“If you take the nostalgia out of the HBC conversation,” she said, “it has really unlocked a lot of opportunity, but that opportunity will look and feel different depending on where you are in the market. Downtown, space has been unlocked for Aritzia and Uniqlo, and that allows larger retailers who are looking to do more, like Aritzia, to introduce a restaurant."
Aritzia introduced the A-OK Cafe, its first in-store cafe in British Columbia, at the Guildford Town Centre in Surrey last year.
"What they’re doing is moving from this idea of product as the hero towards the idea that community culture is the hero," added Elliot.
But in smaller markets, such as Burnaby, Elliot said the offerings will be of a different nature while remaining community-centric.
“You’ll see more fitness or medical uses, as well as daycares,” she said. “They’ll be things communities are asking for.”