By Erika Siegert, Senior Analyst, National Research Insights | 25 novembre 2020

With many retailers struggling to remain afloat, there is no doubt that the retail industry, especially with respect to brick and mortar, has been one of the hardest hit by challenges from the pandemic. Since the onset of the pandemic even before the closures, layoffs, and distancing restrictions the industry has seen multiple bankruptcies declared and some strategies shift, causing many to wonder about the fate of retail. While the summer months saw some restrictions lift, many closures were still announced, including Frank and Oak, Le Chateau, and Miniso, as well as up to 200 Starbucks locations across Canada. Restaurants also continue to battle closures and face challengeto survive, especially with continued limitations to indoor dining. Survey results from Restaurants Canada reported layoffs of 800,000 food service employees in March alone, with 10% of Canadian restaurants closing permanently in the same monthand another 18% indicating that they will likely not re-open after the pandemic crisis.  

However, multiple retail expansions have also been underway recently, including Uniqlo expanding into Quebec with it’s first flagship store in Montreal, as well as fashion retailer Mr. Saturdays opening their first brick and mortar temporary storefront in Toronto’s Queen West strip. American outdoor retailer L.L. Bean has also expanded recently to open its second Ontario location at the open-air centre CF Shops at Don Mills in Toronto. On top of this, the pandemic has pushed both restaurant and retail locations to invest in their digital experience in order to keep up with growing e-commerce demand, and adapt their structure and function to offer convenient services such as curbside pick-up. Walmart is one example of this, with plans to enhance their omni-channel capabilities by renovating supercentres to include in-store fulfillment space, thus increasing the speed of pick-up and delivery. Additionally, evolving demographics are influencing how consumers will interact with retailers, both in-store and online. Increased e-commerce activity across generations has led online retailers to prioritize a personalized customer experience, and brick-and-mortar retailers are following suit to compete.

Amid the challenging second wave of the pandemic and the re-implementation of restrictions at varying levels across the country, retailers have an opportunity to apply learnings from the first round of closures and improve their offerings and manage costs accordingly. Still, whether increased business support from the government by way of rent and wage subsidies is sufficient to keep retailers in operation remains to be seen. Overall, groceryanchored retail has maintained a strong position driving trafficappealing to consumer needs, and attracting the interest of both public and private investors.

Changing consumer behaviour drives growing grocery spending 

Ongoing physical distancing restrictions have reduced the number of trips consumers make to stores, with many now leaving their homes only for essential purchases. Overall retail e-commerce sales have more than doubled this past May, up 110.8% from last year, with online grocery sales increasing by 107%. Consumer spending among supermarkets and other grocery retailers jumped above pre-pandemic levels in March and April, according to Statistics Canada, bolstered by the acceleration of delivery platforms operating within the grocery retail space, such as Instacart partnering with Loblaws and offering one-hour delivery services. Grocery stores have also added pick-up and go options, providing customers with additional convenient choices to get their groceries. Since it has become much easier and safer for consumers to spend on grocery products, this has further driven a consistent and reliable level of demand in the sector.

A shift towards mixed-use assets has been seen in recent years in alignment with changing consumer needs, but now more than ever, investors are leaning into consumer behaviour and how it will shape their asset mix. Results from Altus Group’s Investment Trends Survey for Q3 2020 indicate a strong investor preference for food-anchored retail strip assets over other retail products across all Canadian markets (Figure 1). With low momentum ratios recorded among malls, and power centres reflecting a drop in consumer demand for some brick and mortar retailers, food-anchored assets are a clear winner.

Retail transactions still active despite challenges 

Overall real estate transaction volume amid pandemic challenges has been stronger than many predicted, but year-to-date data shows a dip in Q3 2020 shopping centre transaction volume, with the national volume falling 39% compared to the same time period last year (Figure 2), and volume in the Greater Toronto Area – typically the most active market – down by 54% (Figure 3). This is a result of fewer opportunities in the market, as well as price expectations from both buyers and sellers. Although many may attribute this to retail’s expected downfall, local retail investment volume (including standalone storefronts) has actually increased by 2% in the Greater Toronto Area (Figure 3). 

While this could be due in part to unique challenges faced by small businesses looking to sell, the trend also reflects a shift in buyer profile towards more private investors taking advantage of potential development and expansion opportunities. This also highlights increased interest in standalone retail assets where excess land exists, especially with properties that have expansion and re-development opportunities for investors.

Despite low activity, the inventory of regional malls in Canada, especially good core assets, can still be viewed as properties with prime locations and stable returns lending to an easier shift to meet changing consumer needs and attract top tier tenants. While it is likely that a few underperforming retail assets may ultimately fail, core assets will continue perform well.

Moving forward, food-anchored and grocery retail momentum is likely to continue as we approach colder weather and ongoing possible pandemic-related gathering restrictions. Retail landlords and investors will continue to cater their tenant mix to better align with consumer behaviours, as well as leverage high performing food-anchored retail assets and any opportunities for continued expansion and redevelopment. 


View more insights >


forumDemandez une démonstration

Thank you for contacting us. we will get back to you shortly!

Ce site Web utilise des témoins pour améliorer votre expérience utilisateur. En utilisant notre site Web, vous acceptez que nous ayons recours à des témoins.
cliquer ici pour plus de détails


Désolé, cette page n'est pas disponible en français