Despite a large amount of new construction and mall expansions, local Vancouver retailers are not expected to see an easing of retail lease rates this year. The reason is intense competition, much of coming from giant U.S. retailers.
Confirmed U.S. retailers coming to Canada, and soon to Vancouver, include J.Crew Group Inc., Zumiez, Express Inc., and Ascena Retail Group. TJX Companies, which is already in Metro Vancouver with its Winners and Homesense Divisions, recently launched its name brand discount retail store in Ontario, with three openings.
James Smerdon, director of retail and strategic planning at Colliers International Consulting, believes Marshalls will join other U.S. retailers in Vancouver. "Vancouver is typically second or at least in the top three locations in Canada that U.S. retailers will look at," he said. Canada's comparatively strong economy and rapidly rising dollar provide an irresistible opportunity for U.S. merchants, he said.
Already, U.S. discount giant Target Corp. is scouting locations following its $1.8 billion purchase of Zellers Inc., including 32 B.C. locations, from Hudson Bay Co. Dollar Tree's $62 million acquisition of Vancouver's Dollar Giant is a signal of a strong Canadian expansion by the U.S. chain.
About 1.5 million square feet of new retail space was completed in the past year in Metro Vancouver, and a further four million square feet is under construction. As well, major malls such as Brentwood Mall in Burnaby and Surrey's Guildford Centre, are planning large expansions and upgrades. Yet demand is so great that Colliers forecasts that the Metro Vancouver retail vacancy rate, now at 3.3 per cent, could fall to historic lows this year.
Prime space on Robson Street now ascends to more than $200 per square foot and to $60 per square foot in Yaletown, and local retailers can't expect much relief on rents, analysts say,
"Low vacancy rates will continue in prime areas," said Amyn Somani, CEO of Kazawest, a real estate management and development firm. "The retail property we manage in [Robson Street and Yaletown] areas has had zero vacancies over the past year," he said.
A potential break for tenants may be in the Fraser Valley, where the 450,000-square-foot Shops at Morgan Crossing in South Surrey and Abbotsford's 600,000-square-foot High Street have injected a lot of new retail space into the market. The competition is expected to lower lease rates, at least over the short term.
