Canadian retail sector shows buoyancy

Despite the e-commerce disruption, the retail market in Canada’s key markets is expected to remain strong through 2019.

In fact, according to Marcus & Millichap’s 2019 Retail North American Investment Forecast, downtown storefronts are proving impervious to the convenience proffered by online retail. The report notes that service-oriented businesses, like fitness and dining, are thriving.

“Visitor expenditures rose 2.4% in the third quarter of 2019, carried higher by strong domestic demand,” read the report. “Tourism spending has been a substantial driver to luxury brand expansion as visitors comprise a large portion of all high-end sales, lifting investor interest in high street assets as they are often more e-commerce resilient.”

While internet-based sales increased 20% over the past year, they only comprise 4% of Canada’s retail activity. Still, retailers are bracing for change by embracing omnichannel approaches to remain afloat. Luxury retail is also expected to remain strong through 2019 and compensate for weaknesses in the mid-market category caused by Sears, Lowe’s, Gymboree and others.

Montreal, Canada’s second-most populous city, is replete with international and discount retails, and as the it rides a wave of newfound prosperity, brands are vying for to establish a presence in the city. Tenant demand is so strong in the city that developers are responding with sprawling mixed-use projects.

“Motivated by growing tenant demand, developers are underway on massive mixed-use developments, including Solar Uniquartier, which adds 500,000 square feet of retail, along with La Cite Mirabel, comprising 1.2 million square feet of commercial, industrial and office space,” read the report. “

Shopping malls in Toronto have become test grounds for major international retailers eyeing the Canadian market. This year promises yet more new arrivals and expansion from existing brands.

Malls remain relevant in Toronto as Yorkdale Shopping Centre attracts numerous new high-end retailers and Eaton Centre remains the busiest mall in North America. Elevated tenant demand and a strong local economy have motivated developers to build roughly 2.8 million square feet this year, more than at anytime of the current cycle. The largest delivery of the year will be a 300,000-square-foot power center in Vaughan.

Vancouver has no shortage of wealthy homeowners and retailers have taken note. The influence of Chinese residents and tourists in Vancouver is reflected in the growing luxury shopping segment of the market.

“Beyond the luxury segment, Warby Parker and Muji are just some of the retailers adding stores in Vancouver this year, attracted by strong household formation and stable job growth. An exceptionally low vacancy rate, the tightest in North America, has developers building about 1.3 million square feet this year. A substantial amount of redevelopment projects are underway as well, headlined by the 30-acre Oakridge Centre project in Vancouver.”

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