Shopping Centers Today is the news magazine of the International Council of Shopping Centers (ICSC)
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J u n e 2 0 1 5 / S C T 51 O N T H E G R O U N D : M O N T R é a l a cool economy has sent a shiver through retail Montréal, once home to many of Canada's clothing manufacturers and fashion houses, is now dealing with empty-rack syndrome — a retail market's version of what empty-nesters experience. Garment production has moved to Asia, and mean- while Canadian apparel retailers have been closing stores more than opening them. Locally based Mexx Canada will close its 95 shops this year. Reitmans, one of Can- ada's bigger retailers, has shut down its Smart Set stores. Last year, Canada-based woman's clothier Jacob filed for bank- ruptcy. On top of all this, some big u.S. retailers, and not just apparel, are quitting Canada: Target is closing 133 stores and exiting, and Best Buy says it will axe 66 Future Shop stores. "We are seeing quite a few big-box stores closing shop," said Kristin Belliard, a Montréal-based vice president at Avison Young. Despite the problems, Belliard re- mains optimistic, predicting that some of the open space will go to businesses still expanding in Canada, such as Michaels or LA Fitness. none of this is to suggest that Montréal retailers will not continue to face problems. They will — the biggest of which is the region's stalled economy. "employment in Montréal is growing slightly, but not by much," said Robin Wiebe, a senior economist at the Ottawa-based Conference Board of Canada. "The economy is soft, if not rocky." People shop when they feel ec- onomically stable, and Montréal residents are now looking over their shoulders. Just when housing prices in most big Canadian cities happen to be strong, Montréal hous- ing prices were off by 5 percent year on year as of a few months ago, Wiebe says. At the moment, the retail market looks tight, with occupancy rates somewhere around 95 percent. This will not last, says Robert emblem, an Avison Young vice pres- ident. "Lease rates are not going up, they are stable to declining. Recently, I heard an investor say: 'I was getting $20 a square foot for that space, now I take $5 a square foot less, just to keep the tenant in there.'" Montréal is a dense city with strong High Street shopping, and the tenor of the times can be seen on busy St. Catherine Street. Rents on St. Catherine are the highest in Montréal, and major retailers compete for a presence there. "I've written leases for as much as $220 a square foot on St. Catherine, but that isn't the case anymore," said emblem. "Today someone needing 2,500 to 3,000 square feet might only pay $125 to $150 a square foot." Just five years ago a retailer wanting to be on St. Catherine Street would have to watch for a vacancy and then zoom in fast. Today, emblem says, that retailer can choose from five or six spaces for lease. "not since the mid-1990s have we seen that kind of vacancy," he said. Occupancy and lease rates have been stuck in neutral, says Mark Sinnett, a JLL executive vice president in Montréal. "Any lease increases have been slight." Still, developers like what Montréal, with a population of just over 4 million, has to offer. Last October, Premium Outlets Montréal opened with 84 stores in the Mi- rabel area. The project is managed by Si- mon, which owns 50 percent of the devel- opment. "Premium Outlets has surpassed expectations in terms of visitors and sales per square foot," said Sinnett. Canada's Carbonleo, developer of the very large and successful Quartier Dix30, in the Brossard area of Greater Montréal (it contains upwards of 300 stores and 50 res- taurants) announced that it wants to build an even bigger mixed-use project in the Montréal metro — to be called Quinze40. There has also been a lot of reinvest- ment in existing shopping centers, which could pay off in the near future, Sinnett says. "The economy going forward should im- prove with the lower Canadian dollar, which means a better scenario for tourism and for manufacturing, two significant parts of the Québec economy," he said. "By third- or fourth-quarter 2015, we'll see changes in the economy." — Steve Bergsman R e n t s a R e d o w n e v e n o n F a n c y s t . c a t h e R i n e s t R e e t . Q u a R t i e R d i x 3 0 o F F e R s 3 0 0 s t o R e s a n d 5 0 R e s t a u R a n t s . P h o t o l e f t : P a t r i c k f r i l e t / r e X