SHOP TILL YOU DROP
Ottawa’s capacity for new retail knows no bounds
“We have well over 1,000 new home starts each year and that shows no signs of changing.”
— Andrea Steenbakkers
Each year, the Ottawa market needs another mall the size of Billings Bridge just to keep abreast of the region’s population growth, says Barry Nabatian.
That’s the equivalent of about 450,000 square feet of new retail space. From new expansions at old mainstays like the Rideau Centre and Bayshore Shopping Centre, to fresh developments such as Grant Crossing in Kanata/Stittsville, developers continue to take advantage of the region’s hunger for retail.
According to Nabatian, a veteran retail analyst with real estate appraisal and consulting firm ShoreTanner & Associates, the market is far from reaching a saturation point.
Common industry wisdom holds that a typical resident can support 30 to 40 square feet of retail. The Ottawa market is still averaging just under 30 square feet per resident, and the population grows by about 10,000 per year.
Nabatian also another telling statistic: most retail outlets, achieving annual sales of $350 to $400 per square foot is considered healthy. The average across Canada is about $480. Ottawa tends to be somewhat higher. The Rideau Centre, for example, is past $1,000. St. Laurent Centre, Carlingwood Shopping Centre and Bayshore are all above $700.
BUSY IN THE ‘BURBS
But the biggest growth stories are being told in the suburbs. In Ottawa’s suburban markets alone, Nabatian said, one million square feet of new retail is under construction, with another 1.5 million in the works.
About 350,000 square feet of this new capacity is located in Barrhaven. But according to Andrea Steenbakkers, executive director of the community’s business improvement area, Barrhaven still suffers with a short supply that is limiting opportunity.
“We have well over 1,000 new home starts each year and that shows no signs of changing,” she said. “It’s a steady, healthy number but we haven’t really had much in terms of new commercial growth in a while.”
She is regularly contacted by niche businesses that want to locate in Barrhaven, as well major retailers looking to expand, but unless developers are stepping up to the plate, these prospects have no choice but to stall their growth plans, or opt instead for an adjacent community.
From Steenbakkers’ perspective, big anchor retailers are a boon for everyone, even the smaller retailers they may compete with, since it brings traffic to the bedroom community.
“It’s better to have them inside of our community than outside because it keeps people spending their money in Barrhaven,” she said.
NEVER ENOUGH SPACE
Brent Taylor, broker with Brentcom Realty, is no stranger to the challenges retailers face in finding suitable space in the Ottawa market. He works with the landlords of commercial properties, as well as larger retailers such as Shoppers Drug Mart and Farm Boy.
“There never seems to be enough good quality retail space when we are looking for locations for growing retailers,” he said.
According to Nabatian, one issue with the Ottawa market is the impact of a tight vacancy rate on real estate costs. A healthy market has a vacancy rate of four to eight per cent, but in Ottawa, the rate is hovering just under four per cent. This is creating financial challenges for retailers as their leases come up for renewal with stiff increases in the rental rates.
As a result, many retailers are being forced out of the more central areas of Ottawa, where leasing costs are at their highest, to relatively more affordable options in the suburbs, Nabatian said. But Taylor added that location, as with any sector of the real estate market, remains the most
important consideration in retail.
“Successful retailers will locate in the best area for their business and they will pay more for a location if it is best for their business,” he said. “They won’t relocate simply for cheaper rents. Rent is only one consideration in the success of the business.”
In Taylor’s experience, rental costs alone are not fueling any substantial migratory trend out to the suburbs. Instead, it is the appeal of locating in a lucrative growth area.
For Steenbakkers, this means keeping the Barrhaven BIA’s market research current to identify gaps and opportunities for new development. The BIA doesn’t actively pitch developers to invest in the area, but it does support the decision-making process and assist with navigating city hall’s red tape to ensure sustainable, positive growth.
But Ottawa needs more than just more retail space, said Nabatian.
“We don’t have a lot of high-end retailers.”
— Barry Nabatian
BUT OTTAWA NEEDS QUALITY, NOT JUST QUANTITY
“Overall we have a lot of mid-priced, mid-quality and discount retailers,” he said. “We don’t have a lot of high-end retailers.” This lack drives shoppers to the U.S., Montreal or Toronto.
While this has begun to change with the recent arrivals of upscale retailers such as Simons from Quebec and Norstrom from the U.S., it will take time for market demand to grow enough for others to follow, he said.
The other issue facing the Ottawa market is the imbalance between the suburbs and those areas of the city that are “overstored,” such as the downtown area bounded by King Edward Avenue, Dow’s Lake and Bronson Avenue, Nabatian added. This area of the city holds only eight per cent of the city’s population, but is home to 12 per cent of the retail. This means that area businesses can’t be supported by area residents alone.
“One of the good things for the downtown in the last three or four years is that a lot of condos have been proposed or are under construction,” Nabatian said, which should result in a substantial increase in the number of highincome professionals living in the area.
Despite the imbalances between parts of the city versus others, Taylor is confident in the overall health of the market.
“I think the retail market in Ottawa is stable and solid, with strong demand for both urban and suburban retail space,” he said.