National Post (National Edition)
MALL MALAISE NOT SPREADING TO CANADA
AS U.S. SHOPPING CENTRES SUFFER, CANADA’S THRIVE
TORONTO • A spate of pending department store closures has many industry watchers fretting about the future of shopping malls, but in Canada the picture looks quite a bit brighter than it does in the United States, according to a new study.
An analysis from the Retail Council of Canada reveals malls in this country are significantly more productive, on average, than malls in the U.S. — with average sales of $744 per square foot in Canada compared with US$466 per square foot south of the border.
That’s the case even though Americans on average have more money to spend on discretionary purchases than Canadians, with average household net-adjusted disposable income per capita at US$30,474 in Canada versus US$41,071 in the U.S.
“The state of our shopping centres, particularly our top malls, is healthier,” said Diane Brisebois, RCC president. That’s the case in part, she said, because developers in all major Canadian cities have been quicker to refurbish their malls in recent years and add new tenants, including newto-Canada retailers and licensed restaurants. Many anchor tenants in the U.S., and department stores in particular, are closing underperforming outlets. “Our malls look better, there is less empty space, and that in itself creates an atmosphere that makes people want to come to the malls.”
The news comes as Macy’s prepares to close at least 68 U.S. stores this year, and Sears Holdings is slated to close 108 Kmart stores and 42 Sears outlets. It also follows the closure of 154 U.S. Walmart stores last year and all 450 stores belonging to the bankrupt Sports Authority chain.
In Canada, the data traverses a choppy time for many landlords across the country, who were left in the lurch when Target pulled out after its overly ambitious expansion here, shutting down all 133 stores.
Indeed, the country’s oldest department store chain, Hudson’s Bay Co., has been adding new Saks and Saks off Fifth stores in this country despite a faltering performance in U.S. and Europe. Poor holiday results, news of which prompted the company’s shares to crash this week, were mitigated by a stronger performance at Hudson’s Bay stores in Canada. The retailer’s department store division, which includes its Hudson’s Bay and Home Outfitters stores in Canada, was its only segment that grew its comparable store sales in the nineweek period ended Dec. 31, with a rise of 1.2 per cent.
“(This market) seems to be performing against all odds, and that includes HBC and others,” Brisebois said. “But we have had a very stable economy in Canada and we have not gone through a hotly contested election campaign, which has a numbing effect on retail … uncertainty causes people to tighten their wallets.”
One upside for shopping centre developers and landlords in Canada is that retail has never reached the high per capita penetration it has in the U.S., where only the strongest and most innovative stores will survive and industry watchers assiduously track so-called “dead malls.”
Per capita penetration of shopping centres in Canada is 16.5 square feet per person, compared with 23.6 square feet per person in the U.S.
“More per capita penetration in the U.S. means that more retailers are competing for consumers,” Brisebois said. But an even larger threat, that of Amazon, is also clearly taking a toll in ways that we have not yet seen in Canada, she said.
“We have to look at the impact of e-commerce on malls in the U.S., where it is more advanced than it is in Canada — here we are at about six per cent (of overall retail sales) and there it is at about 10 per cent or 12 per cent. Amazon is now the No. 1 apparel retailer in the U.S. Retailers are studying their square footage, and in many cases are determining that they don’t need as much, and shrinking their footprint, and the first parties that would be affected by that would be the malls.”
RCC’s analysis found that the Toronto Eaton Centre is the busiest mall in North America in terms of foot traffic, surpassing the top two busiest U.S. malls at 48.9 million pedestrians a year.
Regionally, Vancouver and B.C.’s Lower Mainland has the highest average total sales productivity for malls in Canada, a $1,019 per square foot, and less shopping centre space per capita than most Canadian regions at 11.4 square feet per person. It also boasts high tourism spending, some US$2.1 billion a year.
And despite an economic slowdown and growing unemployment in Calgary, the city is still home to one of the country’s productive malls, Chinook Centre, with sales of $1,057 per square foot. Saks will open at Chinook Centre, home to Canada’s first Nordstrom store opening, in the spring of 2018.
MORE PER CAPITA PENETRATION IN THE U.S. MEANS MORE RETAILERS ARE COMPETING FOR CONSUMERS.