I have been a fan of the shopping mall experience for as long as I can remember. Maybe it’s my upbringing as a country girl, but I’ve always found interior malls to be an exciting place to visit.
Despite what appears to be dire times for the mall, market research indicates some traditional shopping centres are doing very well . . . and in fact, aren’t down for the count at all.
$1,000 PSF Club
There is a measure retailers use to gauge income called sales per square foot. The math is pretty simple, overall yearly gross sales over the amount of square footage they occupy.
The Retail Council of Canada collects statistics to determine who has hit the milestone of $1,000 in sales per square foot. This past year they crowned 10 malls in that category for the 12 months ending Aug. 31.
Toronto’s Yorkdale is No. 1 at $1,650 PSF and downtown Eaton Centre in fourth place at $1,488 PSF. Vancouver’s top dogs are Oakridge (1,537 PSF), Pacific Centre ($1,523 PSF) and Metropolis at Metrotown ($1,035).
The growth of luxury brands cannot be denied which is something all of these centres share in common. Yorkdale’s Holt Renfrew along with 20 freestanding/concession operated luxury retailers contribute in excess of 30 per cent of the malls entire sales revenue.
People are spending money in malls and it’s on the good stuff.
Canada vs. U.S.A.
There is a divide in the amount of disposable income between Canadians and Americans. Comparing apples to apples, Americans on average have approximately $41,071 of disposable annual income; Canadians, using US conversion, average closer to $30,474.
Despite the difference, Canadians are spending more. Sales volume in Canadian malls versus their American counterparts is far higher.
The average sales per square foot for Canadian malls was $680 PSF in 2014, compared to $474 PSF in the U.S. In 2015, malls in Canada saw an increase to a national average of $733 PSF while U.S. malls stayed the same.
In 2016, profit widened further. The Canadian average in 2016 was $744 PSF while the U.S. dropped to $466 PSF.
This can partly be explained by the fact there is significantly less mall space per capita in Canada. There is 23.6 square feet for every person in the U.S. while only 16.5 per square feet for every individual in Canada.
Interestingly, the Retail Council reports tourists play a large role in the success of the luxury retail sales in the U.S. as well, though. I think we’re starting to see a theme.
Population density is a significant factor in determining the success of interior malls. The Retail Council reports six of Canada’s top 30 malls are in the Greater Vancouver area which enjoys more per capita than any other region.
Adding to that, 14 of the same top 30 malls are in the Greater Toronto area.
The economic downturn in Alberta has had ripple effects across many industries, but two of their malls still placed in the top 10.
The Retail Council also tracks pedestrian counts. Anyone who believes the traditional mall is dead hasn’t been part of the nearly 49 million people who passed through Eaton Centre last year or 28 million who visited the West Edmonton Mall.
Changing with the times
As I mentioned last week, commercial real estate is always morphing and changing. Shopping malls are no different and Canadian shopping centres are evolving with ever-changing shoppers’ demand.
In Saskatoon, we see landlords increasing investment in nearly all our interior shopping centres to continue providing an aesthetically pleasing and functional way to shop. This is starting to include added features which results in malls evolving into entertainment destinations.
This continual investment helps attract tenancies that still desire to be in the traditional mall format like Regina’s Cornwall, which has just landed Saskatchewan’s first H&M.
So are interior malls dead? Not by a long shot. Consumers and retailers aren’t quite ready to abandon them yet.