A new report by commercial real estate firm JLL indicates Canadians will return to shopping centres and physical retail sites on a “grand scale” this year, which is great news for property owners and managers.
The company’s 2021 Retail Holiday Survey found 85 per cent of shoppers reported they intend to go to shopping centres – and about half will eat or drink at those centres.
Also, this year 72 per cent will go to physical stores to buy or pick up goods, higher than last year’s 64 per cent. This is even higher than pre-pandemic levels when 67 per cent of shoppers reported they would visit physical stores.
Tim Sanderson, executive vice-president, retail, for JLL, said this holiday season is “crucially” important for many retailers who have struggled through economic challenges brought on by the ongoing COVID-19 pandemic for more than a year and a half.
“The statistics that have come out of our study indicate that consumers are prepared to spend more than they have in the last couple of years at the Christmas selling season, which is music to the ears of retailers,” said Sanderson. “The retail industry has been hit by the perfect storm, if you will, between COVID, the economy, inflation, now supply chain, not to mention the problems that are happening in the Port of Vancouver and getting product across the country from the Far East.”
In fact, it indicates on average shoppers plan to spend 11 per cent more on gifts than in previous years.
Holiday make-or-break for many retailers
For most retailers, this is the quarter where they make it or break it.
“They get out of the red, into the black, as they say,” said Sanderson. “It’s great to see consumers (are) feeling flush, that people feel like they have cash to spend and they plan on spending it, and they plan on spending it in bricks-and-mortar retail.”
The changing face of retail in recent years has included the transformation of space in shopping centres. Many non-traditional retail uses are now taking up space in malls including entertainment, experiential uses and education. Big-box space vacated by the Sears and Targets of the world have been renovated and carved up, often with a number of smaller retailers stepping in to lease the areas.
Sanderson said the retail landscape will continue to see an evolution of the uses on shopping centre sites.
“In the major markets, the gigantic push and effort being put on to densifying these sites, whether it be with residential or office towers, that is a bit of a tricky business because you still have to supply parking for the retail,” he said.
“Retail is driven by the consumer and if stores like Sears no longer resonate with the consumer then they don’t need that much space. In fact, Sears has proven that they need no space.
“That space is going to get reconfigured and finding somebody to walk in and take an entire Sears building, those days are also over. Either the Sears box gets demised into five or eight different uses, or gets demised into one or two uses and part of the density attributable to Sears becomes an office tower or a residential tower or something like that.”
Location remains key for shopping centres
Sanderson said Canada is not overbuilt in retail and many retail sites have very strong locational attributes – they’re well-located to serve large populations with relatively easy access.
“Any site that was out on the edge of town when it was built is no longer on the edge of town because the town has grown rapidly. It’s great real estate. Oftentimes it’s very well-served by public transit for example, whether it’s a subway line in a major city or a bus system in a suburban community. So it’s very good real estate,” he said.
“There’s value there. The net operating income that shopping centres are driving has either stagnated or has been reduced partly as a result of COVID. So how do I as an owner go back and get value out of that piece of real estate? I put something else on the site along with what I’ve got.”
Densifying a site also provides a ready supply of new shoppers for the retail sites.
The return of shoppers bodes well both for real estate at malls and the trend toward densification of properties.
“The shopping centre becomes an amenity or an attribute to the residential. So if you look at what QuadReal is doing in Vancouver at Oakridge, I mean the number of towers on that site, first of all there’s going to be, pick a number, 10,000 people all of a sudden on top of the retail. So there’s a built-in market for the retail,” said Sanderson.
“Those 10,000 people you can’t have them all leaving every day to go shopping. If you’ve got them living on top of the shopping centre, that’s a gigantic amenity for somebody buying one of those condos, living in one of those condos.”
Other findings in the JLL report
The JLL report said overall consumer spending in October remained about 20 per cent above pre-COVID levels. Core retail sales for the full year should increase by double digits compared with 2019.
“Canadians saved unprecedented amounts during the pandemic, much of which will go to retail, food services and other service sectors. Canadians who have accumulated savings intend to spend a significant share of these funds by the end of 2022,” said the report.
It said shopper hesitancy seems to be in steady decline in Canada as more people feel comfortable with resuming physical shopping activities, including those in enclosed malls.
“As the pandemic rushes many retailers to enhance omni-channel strategies, shoppers will continue to take advantage of a variety of shopping methods, many of which involve the physical store,” added the JLL report.
“The primary difference between 2019 and 2021 is that many stores now offer curbside pickup services, which have become another reason to visit physical retail.”
The report said curbside pickup has found a niche, especially among intentional buyers. In 2021, 18 per cent are ordering online and driving to the store’s designated pickup area. This is the same percentage as last year when the option first appeared in the survey.
“In contrast, ordering online and having it delivered is trending down. This year shoppers clearly favour physical retail,” it said.
JLL surveyed 1,000 shoppers across Canada from different provinces and territories, income levels, generations and genders about their holiday-season shopping patterns. The survey was conducted from late October to early November.