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By Altus Group | March 27, 2017

In 2016, when Danny Williams teamed up with Plaza Retail REIT to develop yet another power center in the huge, spanking-new Galway mixed-use development in the west end of St. John’s, heads were shaking wondering how a City in the midst of an economic downturn could possibly attract more retail development. Well; think long-term, think about retailers looking for new locations, and realize St. John’s residents enjoy the highest family incomes in Atlantic Canada and they love to shop!

The History: The power centers’ rise to prominence and the rapid growth of retail space within the St. John’s CMA is reflected in the below graph, based on data collected in annual retail surveys by Altus Group. If storefront boutique shops in downtown and other small free-standing retail were added, the total inventory would surpass six million square feet.

In 1995, the majority of retail was represented in enclosed malls followed by neighbourhood strip centers until the introduction of the first power center in the mid 1990’s. Over the past twenty years, the vast majority of growth in retail has occurred through the development and growth of power center locations. The east end Stavanger Drive center was first, followed by Pearlgate in Mount Pearl, Kelsey Drive off Kenmount Road, then Harvey’s and Field Farm opening in the east end. By 2016, the total amount of power center space within St. John’s was approximately 2.3 million square feet. Very little retail land has been left vacant. So is it any surprise that Danny Williams and Plaza REIT placed a bold bet that they could attract retailers, both new and from existing St. John’s locations, to The Shoppes at Galway’ project.

The Shoppes at Galway is a new power center development with over 700,000 square feet of retail to be developed in its initial phase starting later in 2017. The development became much more of a reality with the announcement by Costco Canada Ltd. that it is moving from its current Stavanger Drive location in the east end to the new Shoppes at Galway. It is reported that Costco will increase its footprint by an additional 22,000 square feet with its new store to offer approximately 3.9 acres of shopping. With The Shoppes securing Costco, other big box retailers, strip plazas and restaurants will rapidly gravitate to this west end location.

The Outcome: The Costco move will be an initial blow to the east end retail power center locations as it is most certainly a draw to Stavanger, Harvey’s and even Field Farm. On the other hand, it may be good news to some existing retailers in the area that compete with Costco. There are already on-going discussions to backfill the existing Costco store and the adjacent long-vacated former Target store. This retail area comprises approximately 1.3 million square feet of retail space between the three adjoining power centers, containing several large national and international big box stores. Despite the up-front grief at losing the Costco draw, there remains a large captive high-income shopping population in the east end, and there is little doubt the retail area will remain strong. For example, Marshall’s have recently opened at the former Future Shop location off Stavanger Drive despite the possible relocation of Costco to the west end. There are rumblings that other retailers might consider relocating in addition to Costco. The Shoppes at Galway will definitely shake up the retail marketplace. Vacancies create opportunities, and St. John’s will be an interesting place to watch over the next few years.

The Mall:  When people talk of fish in Newfoundland, they mean cod. When people talk of ‘the Mall’, they mean The Avalon Mall off Kenmount Road, the only regional mall in the Province. Having over 575,000 square feet of retail space, the Mall is more than holding its own against the power center insurgence. Despite losing two anchors, Wal-Mart and Sobeys in the mid 2000’s, the Mall has never displayed much vacancy and is hugely popular. To show the confidence in their investment, Crombie REIT is planning a major capital upgrade of the Avalon Mall which will include realignment of existing access points, construction of a parking garage, and redevelopment of property it owns alongside Kenmount Road, including the Woodgate Plaza and former Kenmount Business Centre office building.

The prognosis for 2017 is for continued growth in power center development due to the introduction of the Shoppes at Galway. Plaza Retail REIT is an experienced developer and will attract new retailers. Consumers can look forward to upgrades at the Avalon Mall. West-enders can look forward to having Costco on their doorstep, and the east-enders can look forward to seeing what new opportunities will develop in their area.

The Future: Over the next decade, other than the Shoppes at Galway, retail development in St. John’s is not expected to repeat the growth it experienced over the past two decades.  It will be a period of high competition and following national trends in the retailing industry. Sales per square foot are expected to remain at high levels relative to the remainder of the Atlantic Provinces. The retail market, barring a sustained economic downturn, is anticipated to remain relatively robust and is expected to weather its way through the current economic downturn in the region. There will, as always, be casualties as weaker retailers struggle not only here but across Canada; anticipating new retailers will fill gaps as they occur.

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