Canada

The mall may be down but it’s not out, say retail experts

The retail sector was already undergoing an evolution with online sales nudging out bricks and mortar, and a growing emphasis on mall experiences such as indoor playgrounds and entertainment facilities.

Now COVID-19 has accelerated those trends and knocked some prominent stores off the mall map, making it “sink or swim” time for retailers that have made it this far, says a blog post by market research company Altus Group.

Its “Key Assumptions Survey” of Canadian commercial landlords shows that 60 per cent of property owners expect it will take more than nine months to fill retail vacancies. In April, 43 per cent of retail landlords were collecting less than 70 per cent of rent. In May, that trend was rising.

However empty it looks while finding its feet, it is too soon to predict the demise of the mall, said Ray Wong, Altus vice-president of data solutions.

“I don’t think these (shopping) centres are going to be shuttering in the next two or three months. They’ll probably work through it. It’s just going to take some time,” he said.

Landlords recognize their tenants are struggling to introduce new safety protocols, said Wong. Some stores haven’t even been able to open yet. Malls want to work with existing and new tenants to keep their properties viable.

“From an owner standpoint they’re trying to figure out what is the right combination to bring people back,” he said.

There is also a growing discussion of rents based on sales percentages rather than square footage, said Wong.

Retail sales rose 18.7 per cent in May, compared to April, “so they are no longer in a free fall,” he said. But sales are still about 20 per cent below February.

John Crombie, executive managing director of retail services in Canada for Cushman & Wakefield, says there will be a growing emphasis on quality versus quantity for retail chain locations in the wake of restructurings and closings of chains such as Reitmans Canada Ltd., Aldo Group, Mendocino Clothing Co. and Victoria’s Secret.

For every sector such as fast fashion that has struggled, other retailers such as grocery and drug chains, many accessible from outdoors, have done well. Home improvement stores have also seen good business as people are spending more time in their houses staring at walls that need painting and carpets that need changing.

“We will likely be entertaining more at home than we have in the past, so we want to make our homes look as good as possible,” said Crombie.

COVID may also have accelerated the trend to back-to-basics shopping.

“Where we may have had the opulence of buying Gucci purses before, we’re a little more trepidatious about our jobs and the long-term effects of COVID so we’re spending more wisely,” he said.

Crombie says shoppers are also making those trips to the store count.

“Traditionally, if someone came into your store, one out of five people bought. We’re finding 40 per cent or almost double that are buying,” said Crombie.

In the short term, he said, there will be an increase in mall vacancies and it could be a while before the indoor playgrounds, escape rooms and other entertainments feel safe to consumers.

Curbside pickup is here for the foreseeable future and Crombie says there will likely be a trend to centralized mall pickup zones where customers can pick up items from several stores at a single location.

Longer term, Crombie expects property owners will accelerate their redevelopment plans: rightsize retail, add residential and senior housing components, and office space.

He also think that malls and retailers are going to invest heavily in technology, with developments such as 3D body imaging that mean a consumer doesn’t need to try on clothes; or apps that personalize the shopping experience, telling you when you can get the item you want at a discount.

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“There’s going to be a huge push to local retailers. We’re seeing this whole focus on local retail. As consumers, you want to make sure the retailers you can walk to will thrive,” he said.

Diverse offerings are what make shopping fun, says Crombie.

“I believe that when you have all your nationals it’s the local small independents that really add the flavour to the shopping centres.”

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