Calgary retail sector weathers weakened economy

Calgary’s retail market displayed surprising buoyancy against the backdrop of low oil prices during the first half of 2015, says a new report by commercial real-estate firm Avison Young.

Calgary remained a tight retail environment, with 2.9 per cent overall vacancy, despite the closures of several Target stores, it said. A year ago, vacancy was three per cent.

“I think the retail sector remains strong because the demand still considerably outweighs the supply,” said Josh Rahme, senior associate with Avison Young in Calgary. “Retailers that rely heavily on franchisee expansion seem to be flourishing in the Calgary market. As jobs in the energy sector dissipate, Calgarians are diversifying and sourcing franchise ownership opportunities more than years prior.”

The company’s mid-year retail report said the vacancy rate is seven per cent in the central business district, 1.2 per cent in the north part of the city, and 3.3 per cent in the south.

“Alberta’s retail sales per capita have traditionally exceeded the national average, which would lead one to believe a need exists for more retail space. However, Calgary’s land use regulations generally serve to limit retail opportunities. As a result, vacant space stemming from closures is highly sought-after,” the report states.

“This has been demonstrated through the immediate action by national, regional and local retailers to take advantage of opportunities in existing centres as they come available.”

Close to 5.2 million square feet of retail space is under construction or planned for the Calgary market, it said. Avison Young said food-store anchored power shopping centre developments will be the dominant format over 2016 and 2017.

Nick Ford, economist with ATB Financial, said that after a short pause in April, Alberta consumers opened their wallets a little more in May when total retail sales reached $6.3 billion, an increase of about 0.4 per cent from April. Sales remain off about 1.7 per cent from a year ago, he said.

“It’s no shock that falling oil prices and news of layoffs started to chip away at consumer confidence at the beginning of the year,” said Ford. “Though marginal, the uptick in May is an encouraging sign, but it’s too soon to speculate whether the retail sector has shaken off the effects of the economic downturn.”

Retailers that rely heavily on franchisee expansion seem to be flourishing in the Calgary market.

JOSH RAHME