MALL MALAISE NOT SPREAD­ING TO CANADA

AS U. S. SHOP­PING CEN­TRES SUF­FER, CANADA’S THRIVE

National Post (Latest Edition) - - FINANCIAL POST - Hol­lie Shaw

• 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 t he 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.

COURTESY OF GETTY IMAGES

Canada’s shop­ping cen­tres are avoid­ing the ‘dead mall’ phe­nom­e­non hit­ting the U. S. in part be­cause there is less mall space per capita here.

MATTHEW SHER­WOOD / POST­MEDIA NEWS

Toronto’s Ea­ton Cen­tre is North Amer­ica’s busiest mall.

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