Luxury outlet centre in Vancouver a first outside of Europe: Part 1

Site preparation is scheduled to begin in August on a luxury outlet shopping centre on Vancouver International Airport property.

The centre, a joint venture between the Vancouver Airport Authority and London-based McArthurGlen Group, will be the first of its kind outside of Europe.

“What we are looking to create in Vancouver is a new, dynamic retail destination: one where shoppers can meet, shop, dine and relax by the river, and which will complement and grow the existing fashion offer in the city,” said Joan Jove, regional development director for the McArthurGlen Group, in an email message.

The first phase of the centre, slated to open in the fall of 2014, will have about 100 tenants in 238,000 square feet of space. A second phase of 130,000 square feet will have about 50 stores.

“We are still in the early stages of the scheme, and it is too early to name specific tenants,” Jove said. “What we can say, though, is that we are seeing strong interest from leading brand names, both European and North American, and in particular from the leading luxury brands, given the pent-up demand for luxury retail space in Vancouver.”

In Europe, McArthurGlen operates 21 designer outlet centres in eight countries, including France, Greece, Germany, the Netherlands, and the U.K. The company partners with more than 860 brands, many of them familiar luxury names such as Prada, Armani, Burberry, Gucci, Hugo Boss, and Ralph Lauren. Other names — like Salvatore Ferragamo, Ermenegildo Zegna, and Michael Kors — are better known in Europe, but would ring a bell with the luxury brand-conscious shoppers the Vancouver outlet centre aims to please.

Brand-conscious Asian Market for Luxury Products

“I would expect the centre is going to try to attract a tourist market and a largely Asian tourist market at that,” James Smerdon, director of retail consulting with Colliers International Canada in Vancouver, said in a phone interview. “So there’s no mystery to why they’re going with a Vancouver location for their first foray outside of Europe. It’s a combination of Canada’s relatively strong economic position globally but also the access to the Asian market, who are well known to be brand-conscious luxury shoppers.”

That Asian market will be practically on the doorstep. A bridge immediately south of the centre connects with the City of Richmond, which had a population of 57 per cent immigrants out of 173,565, according to the 2006 census. It also had a visible minority population of 112,955, of whom 75,725 identified as Chinese. Similar figures for the 2011 census are not yet public. However, according to B.C. Stats, 22,052 new immigrants arrived in Richmond from 2007 to 2011.

“I think being the first so-called outlet mall on the lower mainland to open, it’s probably going to do very well,” Smerdon said, noting that its most direct competition will likely be Oakridge Centre, Pacific Centre, and the proposed Tsawwassen Mills Centre.

McArthurGlen and Vancouver Airport Authority forge deal

Colliers assisted McArthurGlen in forging the deal with the airport authority, Smerdon said, although he was not personally involved in the deal. McArthurGlen had been looking at a site in the Vancouver area for a year or so when, by coincidence, the airport authority issued a request for proposals in 2011 for a retail development on a 29.7-acre site on the southeast corner of the airport lands on Sea Island. The airport, known locally by its call letters YVR, occupies most of Sea Island, which is at the forked mouth of the north arm of the Fraser River between the cities of Richmond and Vancouver.

“This joint venture is a unique approach to building an airport city of aviation-related businesses and other enterprises such as hotels, offices and retail facilities to further strengthen the economy and add to the more than 23,600 jobs already in place at YVR,” Tony Gugliotta, the airport authority’s vice-president of marketing and business development, said in an email message.

About 1,000 jobs will be directly related to the outlet centre upon its completion. About 200 people will be employed in construction of the first phase, he added. A general contractor will be determined this fall.

Financial details about the project are not being released at this time. However, Smerdon noted that the project will likely cost at least nine figures, or in excess of $100 million, to build.

Low rent and big spending

“We’ve seen luxury boutique spending of $600, $700, $800 a square foot,” Smerdon said. “I’m not saying that’s what McArthurGlen’s going to spend over an entire centre. I’d be shocked if they did. But certainly more expensive than just a tilt-up box centre. In the several hundred dollars per square foot would probably not be unexpected.”

What the rents will be for these spaces hasn’t yet been determined, said McArthurGlen’s Jove. “But what we can say is that the rents will be less than full-price locations in the Vancouver area and that they will be sales related,” she said.

The average store size will be around 2,000 square feet. However, a brand may choose to merge as many as five spaces together “to create a flagship store,” she said.

Part 2 of this article: Luxury outlet centre in Vancouver a first outside of Europe: Part 2, Property Biz Canada, July 24, 2012

Related article: Municipalities oppose shopping centre on Vancouver airport lands, Property Biz Canada, July 24, 2012

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