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article imageLuxury retailers drive Canadian mall expansions

By Nicole Weddington     Jul 31, 2014 in Business
The Canadian market continues to exhibit strong interest in luxury retail, indicated by an explosion of renovations projects to expand on existing shopping malls.
At the same time, smaller, more economical retailers continue to feel the pinch, continually struggling to advance.
While luxury retail growth was at a maximum over the last three years, this coming year will show a slower rate of influx, according to marketing research reported by CBRE Group, a commercial real estate company.
Foreign retailers made a mad dash to infiltrate the Canadian market following the 2008 financial crisis, inciting a retail development boom, so much so that construction can't keep up with demand.
CBRE's head research analyst, Ross Moore, says there practically no vacancy left in high profile shopping centres and neighbourhoods. Existing properties in high profile areas are selling at alarming rates.
“We just don’t have empty retail to speak of. (Across the country) malls are generally full. If you’re a Spanish or Italian or U.S. retailer, you are going to be put off by that. Supply is the key. Until we build more that’s going to be a challenge.”
CBRE's study found that during 2013 the majority of new retailer arrivals in Canada were upper-tier luxury and high-end fashion brands. The study measured the type of retailers and numbers that entered the Canadian market.
In addition to the clothing, retailers for jewellery, designer fashion and accessories are now driving the latest demand for retail space.
While most would think flat wages, inflation and growing consumer debt would keep new retailers at bay, the opposite is happening. Indeed, Canadian online coupon sites, such as Shopster.ca, haven't kept people out of the malls, There are enough shoppers with overflowing pockets to keep the luxury goods market alive and well.
“Certain income bands continue to grow more robustly than the rest. If you’re a luxury retailer you don’t care if sales have been growing by one per cent, you’re only interested in the top two per cent of the population and that group’s doing fairly well by and large,” says Moore.
Somehow, Canadian malls tend to sell more than their American counterparts, selling an average of $600 per square foot, while the U.S. sits at $450.
Tourism dollars have a lot to do with this, as well.
“Certainly on the West Coast, Vancouver in particular, Asian tourism is very important. Luxury retailers aren’t there to service Vancouverites, they’re in Vancouver to serve primarily Asian tourists and that is who their market,” says Moore.
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