Restaurants on tap?
A spate of store closures announced in recent weeks brings fresh meaning to the term “retail space.”
Target, Sony and Chapters are all shuttering stores in the province, creating leasing opportunities for new players bold enough to take the space.
But who wants space in an environment of cost-conscious consumers cruising the Internet to find a cheaper deal? Many stores are less places to stock items than to pick them up, space becoming simply a place to gather and connect in real time.
And therein lies a clue.
While much attention focuses on traditional retailers offering can’t-resist pricing or the stuff of everyday life, Ross Moore, director of research for CBRE Ltd., suggests that restaurants may take some of the vacant space.
“There’s constantly new concepts, and as long as you’ve got a good location and a good piece of real estate the space gets leased up,” he said. “It’s amazing to me how big some of the big restaurants are getting. They are big takers of retail space, and they could be an anchor in themselves.”
Target stores – such as the one that never opened in the former Zellers space at Oakridge Centre – may well attract the likes of Walmart or a grocer – but a large-format restaurant is not out of the question.
“You may have to subdivide it and break it up, and that can be expensive, and it takes time, but that’s always an option,” he said.
Moore’s bigger concern is the chill the closures could send through other retailers, particularly foreign players. (A 2013 Colliers International report identified 14 retailers, primarily in the fashion business, it felt were contenders for Canada.)
“Any retailer coming from outside the country will look at Target and at least give it a second thought,” Moore said.
On the plus side, merchandise at Nordstrom will likely be a bigger draw than that at Chapters, which has suffered as much as any other bookstore from online sales.
“Bookstores, that’s a tough place to be,” Moore said, noting that upper-end retailers have fared better. “The reason [Chapters] gave is that rents were just too high, but keep in mind that when they originally signed the lease they knew they were going into a high-rent location. … It’s not like Robson Street rents have gone crazy. … I think Nordstrom will be OK.”
Stable, but rising
During last fall’s Vancouver Real Estate Leasing Conference, Colliers International senior vice-president John Freyvogel stirred debate with a forecast of A-class vacancies in Vancouver hitting 14% by 2018.
Metro Vancouver office vacancies ended 2014 at 9%, down slightly from 9.6% in the third quarter, while downtown vacancies held steady at 6%.
But commentary accompanying Colliers’ latest numbers cites “discreetly rising” availability rates as a sign that vacancies could rise in 2015, per Freyvogel’s call.
Space available downtown now represents 9.5% of the market, up from 8.4% in the third quarter, while the regional availability rate stands at 11.3%.
B- and C-class space has been hard hit by the churn; both posted negative absorption in 2014. More than 387,400 square feet of space was returned in these classes region-wide.
Meanwhile, sublease activity remains strong as tenants shed excess space.
Some good news
It shouldn’t be any surprise that Vancouver again has claimed the rank of North America’s least-affordable city in the annual report from Belleville, Illinois-based consultancy Demographia.
Second only to Hong Kong as the world’s most unaffordable place for homeownership, Vancouver regularly scores poorly. Demographia considers a city to be “severely unaffordable” if median house prices are 5.1 times (or more) median household incomes; its first report, using 2004 data, pegged the Vancouver ratio at 5.3.
This year, the ratio is double the original, at 10.6.
Of course, naysayers will point out that not all real estate sales depend on local incomes, and for the segment of the market that does, there are plenty of options available.
But there are nuggets of genuine good news in Demographia’s report: affordability in some B.C. cities has improved over the past five years (most weren’t included in the original surveys).
Sure, they’re “severely unaffordable,” too, but not as much as they once were.
Victoria, for example, has seen its “median multiple” moderate from 7.9 in 2009 to 6.9 in 2014. Meanwhile, the Fraser Valley, at 6.1, compares favourably with Abbotsford’s ratio five years ago of 6.6.
While they may not be bargains compared with New Brunswick, home of some of the country’s most affordable real estate, the improvement shows that change is possible in one of the country’s tightest markets.
