VANCOUVER — The apparent turmoil in Canada’s retail market symbolized by the recent pullout of Target and the shock closure and rebranding of Future Shop represents a painful but necessary evolution for retailers and commercial real estate landlords, who need to adapt to the shifting shopping landscape, say local analysts.
The news of Future Shop’s closure of nine locations across B.C., coupled with the retreat of 19 Target stores, won’t necessarily spell disaster for landlords, especially in key locations in and around Vancouver, said Stephen Knight, CEO and managing partner for Sitings Realty in Vancouver. But other retail real estate experts interviewed say the closures represent a major challenge to landlords facing a glut of empty space with few prospects to fill it.
“This isn’t all bad news,” said Knight, who also owns Coventry Hills Centre in Calgary, a shopping centre that for 10 years housed a Future Shop, until last week.
“The majority of all these sites on the [closure] list is sought after real estate,” said Knight, who has also arranged roughly eight leases involving Future Shop in the Lower Mainland. Key shuttered locations such as at West Broadway in Vancouver and at the Langley Centre will likely find replacements in short order, he said.
Some of the vacated spaces would have lengthy lease agreements in place. “Some of these might have six months to go, and some might have five years to go,” he said. “The one that we had in Calgary had five years to go, so (Future Shop) is paying the rent for the next five years.”
Curiously, Future Shop had sent Knight a letter to renew the lease for another five years only three months ago, he said.
Knight said he’s not particularly worried about his own shopping centre in Calgary. “In this case, the project is shadow-anchored by Real Canadian Superstore and it is the primary driver of traffic,” he said. “We haven’t heard from any of the other tenants at this point. The retail vacancy in Calgary is about one per cent, so the prospects of filling the space are very good.”
But certain shopping centres here in B.C., such as Orchard Plaza in Kelowna, Coquitlam Centre, Richmond’s Lansdowne Centre, and Surrey’s Central City have now lost both a Target tenant and a Future Shop in a matter of weeks.
“First and foremost they’re going to have some spaces to fill, and that’s not necessarily easy,” said James Shandro, vice-president, consulting and advisory, retail, sales and leasing at Avison Young in Vancouver. “We have a somewhat limited pool of tenants of these anchor sizes and chances are they’re probably already represented somewhere in the marketplace.”
Some of these key vacancies could persist. “Those [landlords] that aren’t as well protected, and there certainly will be some implications, or they’ll definitely feel some sort of financial hit,” Shandro said.
“Some of these landlords are going to have rework, and there is going to be some significant overhaul at certain shopping centres, especially if there’s a Target and a Future Shop, or other anchor-sized holes,” he said.