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Spending down, foot traffic up: Bricks-and-mortar retail holds its own

Jane Domenico is senior V-P and national lead for retail services and retail management services at Colliers Canada. (Courtesy Colliers)
Jane Domenico is senior V-P and national lead for retail services and retail management services at Colliers Canada. (Courtesy Colliers)

A recent holiday shopping report contained good and bad news for retailers, shopping centre owners and operators: 90 per cent of Canadians plan to return to bricks-and-mortar stores, but inflation and recessionary fears could result in as much as a 13 per cent reduction in holiday spending.

JLL Research’s 2022 Retail Holiday Survey also reported 80 per cent of respondents planned to spend less on Christmas shopping than they did in 2021. 

However, even if this scenario ends up being accurate, it won’t lead to shuttered storefronts or long-term pain for shopping mall owners and operators anytime soon, according to one industry observer.

Jane Domenico, senior vice-president and national lead for retail services and retail management services for Colliers Canada, told RENX “shopping malls are in a different asset class than many other sectors of the economy.

"There is a lot of retail data out there that guides the leasing process and relationships between the retailer and property manager are both very close and long-term.

"During the pandemic, retailers and mall operators worked behind the scenes to ensure continuity and stability.

"And while online shopping obviously became a lot more popular, bricks-and-mortar stores will be a key component of the omni-channel approach favoured by successful retail brands as customers return to their favourite malls.”

Colliers report studies e-commerce, bricks and mortar

Domenico was expanding on findings in another recent report from Colliers Canada: Friends, Not Foes: The Unification of E-Commerce with Brick and Mortar and The Impact on Retail Real Estate.

As the holiday season was getting underway, foot traffic at enclosed malls was actually up between 15 and 30 per cent over 2019 (pre-pandemic), resulting in impressive retail sales increases.

“The mall’s role as a community centre is coming back. Savvy mall operators are decorating their common spaces to create that holiday spirit that’s been missing. Photos taken with Santa are showing up on Instagram as consumers crave normalcy and a return to their shopping routines," Domenico said.

“Now that workers are returning to the office, everybody wants new clothes in their closet. Even adjusted for inflation, clothing sales are trending 25 per cent higher than they were last year."

There is a downside, however.

"High inflation is negatively affecting the necessity retail sector (grocery stores, pharmacies, gas bars) where margins are traditionally very low.”

Supply chain issues are easing

Domenico said another factor which has hampered retailers for the past year or so, supply-chain woes, is now easing as well.

“We’re seeing an end to the supply-chain issues that dogged some necessity retailers (groceries, pharmacies, etc.) during the pandemic.

"Large national and regional retailers are used to dealing with upheavals in their markets and moved quickly to establish new suppliers and merchandise sources.” 

Moving into 2023, she believes Canadians will get some relief from inflation and, if you’re a mortgage holder, incessantly rising interest rates.

“By spring of 2023, I think we’ll have a good handle on how interest rates are going to trend. There are already some indications that key sectors will stabilize.

"And while savings rates do lag below those pandemic highs, personal savings are at about the same level as they were in 2015.”

Other trends worth watching for include an expected increase in customers taking advantage of in-store pickups as opposed to home delivery.

“In-store pickup at local retailers saves money for items that don’t meet the free shipping threshold, but that are only sold online. Savvy retailers can push this strategy as being both convenient and environmentally friendly.

"Having a customer come into the store to pick up an item on the way home from work, or while out running other errands on the weekend, is a win-win for the environment and for margin-conscious retailers.

"And, of course, it gets customers back into the store again, opening the door for even more sales.”

Aging malls, pandemic-related trends

Across Canada, 1970s-era malls near the end of their lifespans are being redeveloped into a mixed-use combination of residential and retail, anchored by necessity tenants such as banks, grocery stores, professional services and pharmacies.

“Canadian retailers in these categories have been affected by COVID and inflation, but are professionally run and will remain profitable in most locations,” Domenico said.

Pandemic workplace trends such as the hybridized work environment mean retailers and businesses in some downtown malls have not recovered to pre-pandemic levels.

Domenico stressed that “office workers are important in contributing to the success of both downtown and suburban retailers.”

Surveys such as the JLL and Colliers reports continue to show people enjoy shopping and look to their malls as community spaces.

This is as true in small towns and cities — even ones that might rely on agriculture and resource extraction — as it is in affluent urban neighbourhoods. 

The JLL report also noted that while people did plan to return to shopping centres, they remain sensitive to health concerns and would prefer to avoid crowds.

They also expect "seamless" experiences between online browsing and in-store services, including pickup.

Given the myriad challenges retailers and malls (not to mention consumers) have faced over the past three years, fears about inflation might be misplaced.

“Consumers have balanced their inflationary concerns with their holiday shopping needs and are planning accordingly,” she said. 

“Sales for national retailers have been buoyed by the delayed lifting of COVID restrictions in the Province of Ontario, which is set to take over from B.C. as the leader in retail sales growth in 2022," Domenico concluded.

"Regardless of where interest rates go, consumer behaviour is cyclical and strong retailers know how to follow that cycle.”

To learn more about the state of retail heading into 2023:


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