Canada

Canada

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.


ECONOMIC SUMMARY
ECONOMIC INDICATORS*201420152016F2017F
Real GDP Growth 2.5%1.1%1.3%1.8%
Consumer Price Index2.0%1.1%1.7%2.4%
Personal Income Per Capita$43,850$44,962$45,813$46,934
Employment Growth0.6%0.8%0.6%0.8%
Unemployment Rate (%) 6.9%6.9%7.0%6.8%
Exchange Rate (Per US$)1.101.281.321.32
Retail Sales4.6%1.7%3.7%3.7%

Note: * Annual % Growth Rate unless otherwise indicated. F – Forecast
Source: RBC Economics/Oxford Economics

ECONOMIC BREAKDOWN
Population35.8 MILLION (2015)
GDPCDN$ 1,747 billion (2014)
Parliament Liberal Party of Canada
Head of StateQueen Elizabeth II
Prime MinisterJustin Trudeau
Election date October 2018
RETAIL SALES GROWTH:
% CHANGE ON PREVIOUS YEAR
CANADA2013201420152016F2017F
Retail Volume3.2% 4.6% 1.7% 3.7% 3.7%

LARGEST CITIES (2010)
CITYPOPULATION
Toronto 6,055,724
Montreal 4,027,121
Vancouver 2,470,289
Calgary1,406,721
Edmonton1,328,290
Ottawa-Gatineau1,318,122
Quebec City 799,632
Winnipeg 782,640
Hamilton 765,228
Kitchener-Waterloo-Cambridge506,858
London502,360
Halifax414,398
St. Catharines/Niagara405,906
Oshawa 384,143
Victoria 358,685
Windsor 333,937
Saskatoon 300,634
Regina 237,758
Sherbrooke 212,061
St. John's 211,724
KML-LogoFullscreen-LogoQR-code-logo
Cushman & Wakefield Inc, Canada

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Toronto : 43.653226, -79.383184
Montreal : 45.446674, -75.628883
Vancouver: 49.261226, -123.113927
Ottawa: 45.421530, -75.697193
Calgary: 51.045113, -114.057141
Edmonton: 53.533333, -113.500000
Quebec City : 46.803283, -71.242796
Winnipeg : 49.899754, -97.137494
Hamilton : 43.250021, -79.866091
Kitchener-Waterloo: 43.434311, -80.477747
London: 42.986950, -81.243177
St. Catharines: 43.159375, -79.246863
Halifax: 44.648863, -63.575320
Oshawa: 43.890000, -78.860000
Victoria : 48.428611, -123.365556
Windsor : 42.292676, -82.993335
Saskatoon : 52.156045, -106.682761
Regina : 50.454722, -104.606667
Sherbrooke: 45.400479, -71.883736
St. John\'s : 47.560541, -52.712831

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

 

TYPICAL HOURS
MONDAY - FRIDAYSATURDAYSUNDAY
9/10:00 - 9:009:00 - 6/9:0010:00 - 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 YorkFree PeopleScotch & SodaBig LotsJustice
JYSKP.F. Chang’s China BistroLifetime FitnessTed Baker LondonMarshalls
LegoBrooks Brothers

KEY FEATURES OF LEASE
ITEMCOMMENT
Lease TermsGenerally 5 to 10 year lease terms with one or two 5 year options to renew at market rents.
Rental PaymentMade on a monthly basis at the first of the month. Some retailers have to pay percentage rent based on sales volumes.
Rent ReviewNot 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 LeaseTenant has the right to assign or sublease their premises but must be approved by the landlord, acting reasonably.
Valuation MethodsProperty taxes are calculated on market value assessment.
LegislationLeases are based on the Commercial Tenancy Act.