Landlords not panicking

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This article was published 25/04/2016 (3487 days ago), so information in it may no longer be current.

A rash of store closings over the last 18 months has pushed Winnipeg’s retail vacancy rate to its highest level in more than 15 years.

A new commercial market report by Winnipeg’s Stevenson Advisors Ltd. says the overall rate at the end of 2015 was 6.0 per cent.

Royal LePage Dynamic Real Estate’s Wayne Johnson, author of the Johnson Report on commercial vacancy rates, pegs the rate slightly lower, at 5.8 per cent. He said that’s the highest it’s been since 1999, when it was 6.1 per cent, and nearly 11/2 percentage points higher than it was at the end of 2014, when it was 4.4 per cent.

While the rate is at a level not seen in 16 years, Johnson said it’s important to keep things in perspective.

“If you told… the office market they had a 5.8 per cent vacancy they would say, ‘Hallelujah! That’s the best we’ve been in years,’” he said. “So you kind of don’t want to dump all over the retail guys and say, ‘Oh, look at this! A crisis!’ It’s still really good. It just isn’t as good as the smoking-hot it’s been for more than a decade or a decade-and-a-half.”

Stevenson Advisors vice-president Aaron DeGroot agreed, saying; “It’s still a healthy market.”

DeGroot and Cheryl Mazur, general manager of one of the city’s largest regional shopping malls — St. Vital Centre — also predicted most of the vacant retail space eventually will be filled. It’s just going to take a little longer than it did 10 or 15 years ago, when Canada’s retail industry was going through a growth spurt as a wave of new U.S.-based retailers entered the market and existing players responded by adding new stores in a bid to protect or grow their market share.

St. Vital Centre, like most of the other local malls and retail power centres, has seen its vacancy rate rise in the wake of the recent spate of store closings by such retail chains as Target, Smart Set, Mexx, Future Shop and Jacob. It currently has more than a half a dozen vacant storefronts and an overall vacancy rate of 3.0 per cent.

Mazur isn’t hitting the panic button. She said the mall’s sales are still growing in spite of the vacancies, and there’s still plenty of interest from prospective new tenants.

“We got a lot on the go. But it’s all in the negotiation stage, so nothing is quite signed yet. I’m hoping that sooner, rather than later, we’ll be able to announce that a few different things are happening.”

Mazur also noted this isn’t the time of year when most retailers are looking to open new stores. They like to wait until just before the start of the back-to-school shopping season, so they’ll spend the spring and much of the summer negotiating their leases and getting their new stores ready for a late-summer opening.

The mall also wants to make sure it has the right tenant for the right space, she added. For example, it wouldn’t put a cellphone store in the former West 49 space next to Victoria Secret. That needs to be filled with another fashion retailer, and the mall is currently in talks with one.

DeGroot said while the growth of online shopping is forcing traditional bricks-and-mortar stores to make some painful adjustments, it doesn’t mean all retail development has ground to a halt. Certain retail niches are still expanding and opening new stores.

Examples he gave were service-oriented retailers such as Tim Hortons, and bargain-oriented retailers such as Dollarama and the $200-million Outlet Collection at Winnipeg factory outlet mall, which is under construction in the Outlets of Seasons retail/office/residential development on the northwest corner of Kenaston Boulevard and Sterling Lyon Parkway.

“The outlets concept — we know that’s going to work,” DeGroot said. “So I think what we’re seeing is a bit of a cool-down from a general, overall retail perspective. But when you start to dig down into the niche markets of retail, there are still a lot of strengths from industry to industry.”

He also said while new retail development is occurring, most developers are taking a more cautious approach. Unlike in the early 2000s, when they would sign up one or two anchor tenants and then start building, most are now waiting until they have a good number of tenants locked up before breaking ground.

“Retail is a different animal today that it was at the start of the 2000s, and Winnipeg is no exception. I think it’s going to be a long time before we see any developers coming in and building anything on spec and without a ton of groundwork being done beforehand.”

Know of any newsworthy or interesting trends or developments in the local office, retail or industrial real estate sectors? Let real estate reporter Murray McNeill know at the email address below, or at 204-697-7254.

murray.mcneill@freepress.mb.ca