ICSC: International Council of Shopping Centers

International retailers flocking to Canada, attendees say at conference

Publish Date: September 17, 2013

Category: SCT Newswire Articles
Topics: canadian convention, cbre canada, ivanhoe cambridge, riocan

The ICSC Canadian Convention kicked off yesterday at the Metro Toronto Convention Center and attendees are buzzing about the wave of store openings by international retailers across the country. 

Target, Microsoft, Nordstrom and Victoria’s Secret are among the U.S. names preparing store openings up there, and H&M, Lego and Uniqlo are some of the retailers from overseas lands. These all want access to Canadian consumers, who are working in record numbers and at median incomes slightly higher than those in the U.S. Significantly, though, Canadians have fewer places to shop than do their U.S. counterparts. Canada has about 15 square feet of retail space per capita, versus nearly 24 square feet per capita in the U.S.

Of course, cramming that shopping activity into less space helps to make Canadian stores more productive. Canada’s retail sales per square foot of store space average some $600 per year, versus the U.S. average of about $455 per square foot. “Part of the attraction for Americans is that the retail per capita here has always been less than in the United States,” said Edward Sonshine, CEO of Toronto-based RioCan Real Estate Investment Trust, Canada’s largest retail REIT. “The No. 1 impact of that for us as landlords is great — you have a lot more demand for limited space.”

Naturally, the influx of international sellers is pressuring domestic companies to work harder to stay competitive. “For Canadian retailers, the majority are being forced to up their game — to get better, be more competitive, be a lot sharper on their pricing and product lines — because there is more competition than there used to be, and rents are going up,” Sonshine said.

To keep up with demand, developers are adding about 5 million square feet of retail space annually, says Ross Moore, director of research at CBRE in Canada. Nearly all of that consists of additions to existing malls and shopping centers, with U.S.-style speculative greenfield construction held in check by restrictive zoning, a lack of highway infrastructure to reach undeveloped areas and a more onerous permitting process than in most U.S. communities. At this pace, demand will continue to outweigh supply for the foreseeable future.

The lion’s share of new retail leases for landlord Ivanhoe Cambridge are with international companies, chiefly from the U.S., according to Roman Drohomirecki, the company’s co-COO and executive vice president for the Central and Western regions. “There is a revolution going on here with our retail,” he said. “There is without question a continued, strong migration into Canada and into our portfolio.” High occupancy rates enable Ivanhoe Cambridge to pursue what Drohomirecki calls market-defining international retailers as tenants. One of those is Kiehl’s, which models its stores after Old-World apothecaries. “Some of the U.S. players we are particularly interested in, because we know they’re not doing a mass rollout,” he said.

Making room for those preferred retailers, however, usually requires weeding out underperforming tenants. “The only way they are getting in [to fully occupied properties] is likely at the expense of the weaker links at the shopping center,” Drohomirecki said. “We don’t do that in any kind of a cavalier way, but it is important for us to bring in market-defining tenants. You wait for an expiry or sometimes you induce an expiry to get these guys in.”

Competition in Canada’s retail markets will only intensify as international firms continue to pile in, Drohomirecki predicts. “I suspect right now there are a number of tenants in the U.S. just watching to see how Target is going to do, how Nordstrom is going to do — and that’s going to push the next wave.”


See More News