While many of the world’s leading economies have experienced significant pain during the downturn, Canada has fared relatively well. Consumer growth has been spurred by a strong labor market, a stable financial sector, increases in personal income, and low interest rates. Consequently the retail property sector has enjoyed relative stability.
Although the size of the retail market in Canada does not approach that of its neighbor to the south, strong retail fundamentals and stability have attracted foreign investment and global retailers, led by U.S. brands, perhaps unsurprisingly as 75% of the consumer base lives within 125 miles of the U.S. border.
With an increasingly affluent population and thriving cities like Toronto, Calgary, and Vancouver, foreign investors and retailers will continue to look to capitalize on the strong Canadian consumer.
|Real GDP Growth||2.5%||1.1%||1.3%||1.8%|
|Consumer Price Index||2.0%||1.1%||1.7%||2.4%|
|Personal Income Per Capita||$43,850||$44,962||$45,813||$46,934|
|Unemployment Rate (%)||6.9%||6.9%||7.0%||6.8%|
|Exchange Rate (Per US$)||1.10||1.28||1.32||1.32|
Note: * Annual % Growth Rate unless otherwise indicated. F – Forecast
Source: RBC Economics/Oxford Economics
|Population||35.8 MILLION (2015)|
|GDP||CDN$ 1,747 billion (2014)|
|Parliament||Liberal Party of Canada|
|Head of State||Queen Elizabeth II|
|Prime Minister||Justin Trudeau|
|Election date||October 2018|
|RETAIL SALES GROWTH: % CHANGE ON PREVIOUS YEAR|
|LARGEST CITIES (2010)|
Major Domestic Food Retailers
Loblaw’s, Metro, Sobey’s, Longo’s, Overwaitea, Save-On-Foods
Major Domestic Non-Food Retailers
Canadian Tire, Roots, Indigo, Holt Renfrew, RONA, Shoppers Drug Mart, Hudson’s Bay Company
International Retailers in Canada (a selection)
IKEA, Home Depot, Walmart, Old Navy, Apple, Best Buy, H&M, Zara, Forever 21, Nordstrom, Saks Fifth Avenue
Food & Beverage Operators
Tim Hortons, Starbucks, Second Cup, McDonald’s, Pizza Pizza, Harvey’s, Swiss Chalet, Wendy’s, Kelsey’s, The Keg, St. Hubert
|MONDAY - FRIDAY||SATURDAY||SUNDAY|
|9/10:00 - 9:00||9:00 - 6/9:00||10:00 - 5/6:00|
Having been fortunate to escape some of the worst excesses of the economic crisis, Canadian consumers saw less economic malaise than its American neighbors and any other developed country.
Thanks to a strong labor market, well-functioning banking sector, income growth and low interest rates, consumer spending has been a major source of growth coming out of the recession, fuelling increased investment and market stability in retail property.
With 12.5% of Canadian jobs, the retail sector is Canada’s largest employer. The retail industry sold an estimated $454.1 billion worth of goods and services in 2011 which was an increase of over 4% from 2010.
Consumer confidence levels didn’t drop as dramatically as they did in the US, with retail sales continually edging upwards from February 2009 to June 2011.
Over 50% of Canada’s leading retailers are foreign owned and operated, largely by US companies, not surprising as 75% of the Canadian population located within 200 km of the US border.
Led by American retailers, foreign investors and retailers are looking to capitalize on the strong Canadian consumer, most especially in rapidly growing urban areas of Toronto, Calgary and Vancouver.
Foreign retailers who prefer to maintain property ownership as part of their financial model will have trouble with Canadian property owners who prefer to lease rather than sell.
While Canadians have access to an average 15 SF of retail space per person, in comparison to 23 SF per person in the US, land is scarce and expensive with a 20% rise in prices from Q2 2010 to Q2 2011. This has fuelled large-scale redevelopment of existing retail space in Vancouver, Calgary and Toronto.
Power Centers (Big Boxes) have been a very successful retail format in Canada and the biggest growth in inventory during the last 15 years, accounting for approximately 162 million SF in about 467 sites. Average net retail rates for Big Boxes range between $16 to $24 PSF.
According to Kircher Research, E-commerce in Canada is estimated at $16.5 Billion in 2010 and estimated to increase to about $30.9 Billion by 2015.
The five largest shopping centre owners combined own almost 33% of nationwide inventory of shopping centres.
The tight retail property market makes it difficult for companies to achieve economies of scale in the regionally weighted Canadian market.
With such short supply of quality retail locations, one point of entry for foreign retailers is to acquire a Canadian chain or their property. Target and Big Lots are two brands that have taken this approach.
New Entrants to the Market
|Kate Spade New York||Free People||Scotch & Soda||Big Lots||Justice|
|JYSK||P.F. Chang’s China Bistro||Lifetime Fitness||Ted Baker London||Marshalls|
|KEY FEATURES OF LEASE|
|Lease Terms||Generally 5 to 10 year lease terms with one or two 5 year options to renew at market rents.|
|Rental Payment||Made on a monthly basis at the first of the month. Some retailers have to pay percentage rent based on sales volumes.|
|Rent Review||Not a common practice in Canada.|
|Service Charges, Repairs and Insurance||Tenant is responsible to pay all services charges for their premises, which include electricity costs, heat, gas, garbage removal, janitorial, etc.|
|Property Taxes and other costs||Tenant is responsible for their proportionate share of property taxes for their premises.|
|Disposal of a Lease||Tenant has the right to assign or sublease their premises but must be approved by the landlord, acting reasonably.|
|Valuation Methods||Property taxes are calculated on market value assessment.|
|Legislation||Leases are based on the Commercial Tenancy Act.|