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Latest Research on Emerging Retail Trends in Canada and in The National Capital

The retail landscape in Ottawa, in step with the rest of Canada, is undergoing a swift transformation as the influence of technology, such as the proliferation of online shopping and reviews, coupled with changing consumer habits and preferences present a unique set of challenges and opportunities for retailers. Consumers are gravitating towards large discount retailers or high end vendors that have carved out a distinct niche, squeezing out many of the ‘middle ground’ retailers.

In the fashion industry, mass discount retailers like Walmart, Costco, and Amazon are thriving by supplying an abundance of cheap, chic, clothing, while the market for high-fashion wares sold by retailers such as Nordstrom, Holt, and Saks Fifth Avenue also continues to flourish. In contrast to this success, mid-level clothing competitors, such as Bikini Village, Le Chateau, and Reitmans (Canada) Ltd. are suffering from weaker earnings. Some retailers, like Danier Leather and fashion chain Limite, have filed for bankruptcy protection and many retailers, such as Jacob, have closed outright - CBC.

The disappearance of the 'middle ground' is a recurring trend throughout various retail industries across the country. Larger corporations are consolidating market share by purchasing medium sized competitors, for example, Sobeys’ acquisition of Canada Safeway Ltd., Loblaws’ purchase of Shoppers Drug Mart, and Canadian Tire acquiring Sport Chek, Nevada Bob’s Golf and Pro Hockey Life.

Primecorp’s Retail Leasing Group

At Primecorp, we pride ourselves in staying abreast of the latest developments in the markets we serve. Primecorp’s Retail Leasing Group is led by one of our Founding Partners and Principal, Steve Lerner, an adviser who has helped shape the Ottawa Retail market and has over 31 years experience in the areas of retail investment sales, land and retail development. Steve’s academic and executive experience in medicine and engineering have served the Retail Leasing Group very well in our information age.

Sales Representative, Candice Lerner-Fry, is another pivotal member of the team, having assisted with hundreds of retail transactions for prolific local and national retailers and landlords since joining Primecorp in 2008. For example, currently, Candice represents Starbucks Coffee Canada as their primary broker throughout the majority of South-Eastern Ontario with geography encompassing the Ottawa Valley and the 401 corridor.

Canaries in the Coalmine: Early Indicators of Canadian Retail’s Future

Primecorp Commercial Realty Inc. and its dedicated research division were proud to co-author a retail oriented research paper with our Barclay Street affiliates in Calgary. Our knowledgeable team is totally committed to providing our clients with the highest quality information upon which to make sound business decisions, so it was no surprise to us when we were approached by Barclay Street Real Estate through the TCN Network to collaborate on a Canadian Retail Market White Paper.

Two of our team members co-authored Primecorp’s contribution to this paper: Chris Turvill and Kristen Coulas. Chris has been with Primecorp since 2008 and is the head of our Research Division. With a background conducting research for a major American financial institution and 8 years of experience in real estate, Chris is a wealth of information. Kristen joined us last year and has used her background in Information Science and English to bring a sense of structure and linguistic accuracy to her contributions.

The full research paper, Canaries in the Coalmine: Early Indicators of Canadian Retail’s Future, was distributed at the TCN table at ICSC RECON, Las Vegas, May 22-25, 2016.

Implications for the Ottawa Retail Leasing Market

Despite being somewhat insulated from the economic turmoil experienced in other parts of the country by a stable workforce, Ottawa is not immune to the prevailing retail trends happening across Canada. This impact is evidenced by large vacancies left in the wake of closures by major retailers like Future Shop, Target Canada, and more recently, Danier Leather; all of which occupied significant gross leasable area in the National Capital Region.

Retail Vacancy Rates Ottawa 2007-2015

According to Cushman Wakefield, Ottawa experienced a steep increase in vacancy rates for retail centres to the tune of 5.0% in Q2 2015, up from 2.6% in 2014. However, by Q4 of 2016 the vacancy rate decreased by 40 basis points to 4.6%, as some of this space had been backfilled by other large scale retailers. For example, Wal-Mart now occupies two former Targets, while Lowes is currently planning a location in the former Target store at 1055 St. Laurent Blvd.

Retooling of Community Shopping Centres

Community Shopping Centres in Ottawa have experienced relatively high vacancy rates, compared to their share of the overall retail composition. In an attempt to reverse the tide, major landlords in this space are adapting their business models to current market conditions. Riocan REIT, Canada’s largest retail landlord, has recently announced their intent to construct thousands of residential rentals across Canada, which will be directly attached to some of the smaller, struggling, enclosed malls... betting that an increase in residential units will provide a strong consumer base (Westgate Shopping Centre, Gloucester Centre, and Elmvale Acres all have plans in the works to put this concept into play in the near future).

Ottawa Retail Vacancy Distribution 2015

Rise of Mix-Use Developments: Landsdowne Live

One of the most prominent examples of this type of mix-use development in Ottawa is Lansdowne Live. The recently redeveloped sporting venue, home to the local CFL, NASL, and OHL sports teams, has an outdoor stadium, indoor hockey arena and commercial space containing 360,000 sf of retail, 100,000 sf of office space, and 300 residential units. Innovative tenants, such as Vancouver-based pub chain, Local, have successfully capitalized on the unique appeal of locally sourced products, like craft brews that conscientious consumers are willing to pay more for, knowing they are directly supporting local farmers and producers… another emerging trend in the retail landscape.

Lebreton Flats and Zibi Project Spell Retail Opportunity

Lebreton Flats will ratchet up the concept of a mixed use development to levels not previously seen in the National Capital Region. Over the next decade, a new downtown arena will be built to house the Ottawa Senators and double as central concert venue in the heart of the nation’s capital. As part of the winning Rendevous Lebreton bid, 800,000 sf of new retail space will be an integral part of the project, along with thousands of residential units. Couple this with the estimated 1,200 new residential units soon to be added with the nearby Zibi project, on the islands between Quebec and Ontario, and we a have a high potential for lucrative retail opportunities in this central hub of the National Capital Region.

Rideau Centre Revitalized

We don’t have to wait for these exciting projects to come online to witness the unfolding retail opportunities in our region. Just last Thursday, there was a huge opening of the expanded Rideau Centre, Ottawa’s flagship indoor mall:

Three years and $360 million later, the final phase of the Rideau Centre redevelopment officially [opened] to the public on Thursday. Ottawa Citizen

This redevelopment added 21 new stores, totaling 230,000 sf, with 4 new levels, including notable brands such as Simons, Anthropologie, H&M, and Nordstrom (last year).

Tech Savvy Retailers Poised for Success

Amidst these exciting developments, retailers who are adept at technical innovations, such as the use of RF Beacons to offer in-store specials; paying attention to emerging trends like temporary pop-up shops; integrate the work-live-play model of millennials and choose their target segments carefully (high-end and quality discount stores are thriving at the expense of middle ground brands) will have increased opportunities for business success in the Ottawa retail market:

Technology today is changing the retail landscape at a pace that hasn’t been seen before, it is an interesting time to observe and work within this evolving and exciting retail industry. - Chris Turvill
, Head of Research for Primecorp

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