Which trends survive? Retail’s pandemic pivot faces new test

IMAGE: Jamie Tate is founder and president of Tate Economic Research. (Courtesy Tate Economic Research)

Jamie Tate is founder and president of Tate Economic Research. (Courtesy Tate Economic Research)

Many retailers have had to change the way they traditionally did business due to the COVID-19 pandemic, and a June 9 panel at the Land & Development Conference examined this evolution.

Panel moderator and JLL Canada executive vice-president and national lead for retail Tim Sanderson opened the virtual session by congratulating landlords for helping retailers get through the crisis during the past 15 months.

Tate Economic Research Inc. president Jamie Tate followed with a presentation looking at some key retail trends.

National in-store sales were constant and e-commerce sales were increasing until March 2020, when COVID-19-related measures closed or restricted occupancy in a wide range of stores. Brick-and-mortar sales bottomed out, but had returned to pre-pandemic levels by last July. Additional closures through the first half of 2021 have reduced those sales again.

Tate said e-commerce sales have subsided since the peak of last May, but are still well over double what they were before the pandemic. People are becoming more comfortable with shopping in stores again, Tate said.

There’s been an accelerated shift in curbside pick-ups from stores and restaurants, and grocery deliveries and meal kit purchases have also grown in popularity. Sanderson said online and click-and-collect shopping may create lost sales opportunities, however, as consumers often pick up impulse purchase items while they are physically in a store.

However, more technologically advanced drive-through services, self-checkouts and click-and-collect purchasing look like trends which are here to stay, according to Tate.

Repurposing shopping centres

Tate expects increased shopping centre redevelopments, where at least some retail space will be removed and residential or space for other uses will be added. He said some mid-box stores are being re-tenanted and sometimes being used as distribution centres.

RioCan REIT chief investment officer Andrew Duncan said the trust isn’t actively pursuing industrial uses in shopping centres, although it’s paying attention to the trend.

“Industrial rents are just not the same as retail rents. And when you’re curating a retail centre, whether it’s enclosed or unenclosed, which is typically what we’re looking at in a primary market, dropping an industrial use into the middle of it impacts it. It changes the look.”

Sanderson said retail and industrial land are both selling for approximately $3 million per acre in the Greater Toronto Area.

“A lot of our retailers are becoming pseudo-industrial users anyway,” said Duncan. “We’re paying attention to it in terms of trying to figure what the highest and best uses for some of the edges of our portfolio are.”

Increase in omni-channel retail

Some formerly digital-only retailers have moved into physical spaces, including eyeglass merchant Warby Parker, men’s custom apparel retailer Indochino, clothing seller Frank and Oak, mattress-maker Casper and Amazon, which Tate said now has 600 physical stores in North America.

“When a company like Amazon is talking about the importance of a retail presence, it’s a good sign for our industry.”

Tate expects there will be less demand for physical retail space in the future because of omni-channel retailing. Stores won’t need as much inventory in their back rooms since so much shopping will be done online and goods will be shipped directly from a warehouse.

“I think, going forward, we’re going to see more retailers doing more with less,” said Tate. “There’s still tremendous growth out there due to population, but the amount of space per person is declining. And that’s what we’re seeing impacting some of the new centres, as well as some of the planned centres.”

Retail rent collections update

Rent collections hit a low in April 2020, but Tate said they’ve returned to a point close to where they were before COVID-19 appeared in Canada.

Duncan said RioCan immediately repurposed many employees to deal exclusively with tenants when the pandemic hit. It has deferred some rents, abated others and entered more creative lease deals than it may have in the past.

Rent collection and occupancy were both at 96 per cent in the most recent quarter, when RioCan signed a million square feet in lease deals, according to Duncan.

“I think we know our tenants even better than we did before and that can’t be a bad thing. I think we’ve got a better working relationship than we had before and we thought we had pretty good ones.”

Trinity Development Group senior vice-president of investments Kevin Stark said his company has worked with individual tenants on a case-by-case basis regarding rent collections. While some tenants have been very good to work with, he feels others may be trying to take advantage of the situation.

“We are your landlord and not necessarily your banker,” said Stark. “We’re happy to extend some terms and some concessions, but we bore a large brunt of this.”

Reopening Canadian retail

The U.S. is ahead of Canada in reopening retail and Duncan said landlords south of the border have told him “they’re back to pre-pandemic demand and they’re back to pre-pandemic deal negotiations.”

Duncan believes Canada can expect the same thing in the coming months as lockdowns end.

“I think you’re going to see landlords being a little choosier about who they do deals with in terms of how stable those tenants are and how, if we end up in a similar situation in the future, are they going to be able to transact?” said Duncan.

“Having faith in their covenant is one thing, having faith in their business viability is even better because if they’re going to be successful, they’re going to pay the rent.”

Hullmark asset management VP Mitch Gillin said there are also American companies interested in opening in Canada when borders open widely again.

Stark believes more shopping centre space will be allocated to dentists, doctors, medical clinics and other similar uses — which aren’t impacted by e-commerce — as malls right-size and transition.

Food service retailers

Regent Street is a boutique retail real estate brokerage that performs site selection and lease document negotiations for a range of retail clients and also represents select landlords. The majority of its clients are food service retailers.

“It’s been amazing to see so many restaurants pivot as quickly as they have into pick-up and delivery models, and particularly restaurants that you’d never imagine doing that,” said company founder Vanessa Oliver.

Some restaurants are also selling groceries and meal kits as well as prepared meals.

“I think that those offerings will be here to stay,” said Oliver. “I think that the consumer, as it relates to retail and restaurant offerings, will be winners at the end of this.”

Oliver said many of her clients were hit hard by COVID-19 shutdowns, but some used the crisis as an opportunity to negotiate more favourable locations and lease terms.

“I’m expecting that business is going to be stronger than ever for retailers and restaurant groups as soon as we’re allowed to go out and enjoy those things,” said Oliver.

Landlords are still looking to fill spaces, Oliver said, especially in new mixed-use developments where construction is continuing and the property owners and managers don’t want to reach completion without retail tenants in place.

“We’re seeing landlords and tenants needing to work more collaboratively than ever. But the good news is deals are still getting done. I think there is a lot to be positive about if we can just manage these next few months until we get to the other side.”

Streetfront retail

Hullmark’s retail holdings are largely urban streetfront locations. Gillin has been impressed by the resilience and adaptability of operators, many of which have been pushed by the pandemic to become omni-channel retailers and service providers.

Sanderson said if retailers don’t have an e-commerce platform now, they won’t be paying rent in five years.

Gillin said some retailers are now engaging customers in different ways through social media and other online platforms. Savvy restaurant operators are now doing pre-sales and using scarcity to drive demand, help manage their inventories better and improve margins.

Gillin also highlighted a fitness centre which is renting its exercise bicycles to customers in addition to conducting online classes.



Steve is a veteran writer, reporter, editor and communications specialist whose work has appeared in a wide variety of print and online outlets. He’s the author of the book Hot…

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Steve is a veteran writer, reporter, editor and communications specialist whose work has appeared in a wide variety of print and online outlets. He’s the author of the book Hot…

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