Nordstrom sign of city’s rising wealth
Upscale fashion store Nordstrom is finally ready to open its doors at Ottawa’s Rideau Centre, and the high-priced retailer is likely a sign of things to come, according to experts.
Thanks to rising incomes due to government employment and a recent boom in the number of retirees in the nation’s capital, Ottawa’s wealthy are reaching new heights. And this is acting like a beacon to higher-end retailers of all stripes.
“Based on Statistics Canada data in 2011, the average household income was $97,000 in Ottawa,” said Barry Nabatian, director of market research at Shore Tanner & Associates. “Right now 4.5 out of 10 households are making more than $100,000. That’s a huge increase. These are the people who are spending a lot of money on luxury items.”
Nabatian said he wasn’t fully aware of the jump in income for Ottawa’s high-end earners until several luxury brands started knocking on his door asking for help in determining where in the city they should be putting a new store.
“We are working for two different luxury retail developers and I’ve actually had to dig into this,” he said. “What seems to be happening is that the gap between the well-off and middle class in Ottawa is increasing. It’s becoming wider.
“For most working class people and professionals, income has not increased significantly. But, for the wealthy, their investment income has increased phenomenally.”
Markets have rebounded significantly since crashing in the global recession of the late 2000s. This has brought major rewards — returns on investment of as much as 35 per cent — for those who had the ability to invest. The TSX Composite Index, which is used as a benchmark to determine trends in the stock market, stood at around 9,000 points in 2009. It’s now around 15,000 points, a 66.6-per-cent increase.
To put it plainly, people who had money in the markets are seeing gains. Those who had money to invest while the markets were down during the troughs of 2009, 2010 and 2011 are seeing major leaps in their investments. Many are using their new-found wealth to buy luxury goods.
Despite recent economic turmoil, the city is still among the top three nationally when it comes to average incomes per household.
Added to the investment wealth in the capital is a housing market that has seen average home values increase an average five per cent every year. The Ottawa Real Estate Board said the average selling price for a resale home in Ottawa, excluding condominiums, was $370,442. Retirees looking to downsize are the biggest winners of the rising home valuations.
On top of everything is relatively low unemployment, high post-secondary education levels, and the fact that Ottawa residents spend more than $15.3 billion on retail annually. All things considered, it’s no wonder Nordstrom, Whole Foods and Tanger have been pushing to break into the market.
Others, potentially including Hudson Bay Corp.’s new owner Saks, are coming.
Ian Lee, an assistant professor in the Sprott School of Business at Carleton University, said even anecdotal evidence seems to suggest that Ottawa’s high-end shoppers are spending and aren’t afraid to flaunt their wealth.
“In the parking lots at hospitals, universities and downtown there seems to be a significant number of luxury cars,” said Lee. “Audis, Mercedes and BMWs seem to be falling out of the trees. There is a lot of them and there seems to be an appetite in Ottawa for that kind of a luxury good.”
He said the luxury brands have had a good hard look at Canada’s more populated cities and are now realizing that they’ve missed out on the nation’s capital.
“These retailers, like Nordstrom, when they look at Canada they tend to focus on the biggest cities like Toronto and Vancouver. But, as they develop a deeper understanding of the Canadian market, realize that there are tremendous opportunities in Ottawa,” he said. “I think this is belated recognition by these higher end firms.”
Lee agreed with Nabatian that Ottawa’s income base is relatively stable compared with that of other markets, thanks to a high percentage of employment in the public sector and the presence of various levels of government, universities and hospitals around town. Those jobs also pay higher than most private sector positions.
“It produces much greater stability than in a city that relies more on the private sector that goes up and down with the business cycle,” said Lee.
“You’re not going to become a millionaire working in the public sector, but at the same time you’re not going to become poor, either.”
Ottawa shoppers are among the biggest spenders in the country. Stores collect on average $475 per square foot in retail sales annually. In other Canadian cities, shoppers spend between $250 and $350 per square foot annually.
You’re not going to become a millionaire working in the public sector, but ... you’re not going to become poor, either.