Investors Seek Retail Centres in Emerging Markets With Opportunities To Densify
Investors Seek Retail Centres in Emerging Markets With Opportunities To Densify
Retail Investors Favour Secondary Markets Near Toronto
With retail properties performing well in the Greater Golden Horseshoe, investors bet on two malls in emerging urban centres with plans to densify. The sale of two super regional malls — Conestoga Mall in Waterloo and White Oaks in London, Ontario — signals confidence in outer retail markets near Toronto.
In recent years, a total of 15 malls across the Greater Toronto Area have proposed plans to add residential towers on their properties to create larger consumer populations surrounding their shopping centres.
This trend has expanded out into the Greater Golden Horseshoe and beyond into London, Ontario. In August, Westdell Development Corp. added White Oaks to its commercial holdings and plans a new to rejuvenate the center by renovating the facade, adding new stores on pads separate from the mall, and residential towers on-site. Westdell purchased the 698,500 square foot super regional mall from BentallGreenOak for $141 million or $202 per square foot. The site sits on 46 acres, translating to 35% coverage, lending to the new redevelopment plans by allowing plenty of land for intensification.
London, Ontario — a smaller city 200 kilometres west of Toronto — offers affordable urban living while still being in proximity to larger metropolitan centres accessible by major highways and transit. The city of London is investing more than $200 million in renewing aging infrastructure with projects focused on supporting growth, including two rapid transit projects. London is one of Canada’s fastest-growing cities and these investments will facilitate the city’s expansion and recent boom in population growth boosted by immigration and inter-provincial migration.
Similarly, the purchase of Conestoga Mall by Primaris Real Estate Investment Firm from Ivanhoe Cambridge for $270 million conveys assurance in Waterloo’s retail market. Conestoga Mall recently underwent a significant $46 million redevelopment in 2018 under its former owners. The mall was the first Canadian shopping center outside a major metropolitan region to see annual sales per square foot surpass $1,000 in 2018, according to the Canadian Shopping Centre Study 2018. At the time of sale, the mall was 94% leased and sits on 49.78 acres, covering just 31% of the property, leaving the potential for intensification. Conestoga Mall is a major transit hub connecting to the route of Waterloo’s new ION LRT, which was completed in 2019, making the site ideal for residential development.
Retail leasing picked up in 2021 in the Greater Golden Horseshoe, backfilling most of the spaces that were vacated during the pandemic, and many retail landlords are adapting to changing consumer behaviours. With a marked increase in online shopping, the amount of space required by retailers has decreased as consumers shift to an omni-channel approach to shopping. Brick-and-mortar locations are serving as showrooms for consumers to see products that they can purchase online and conveniently have delivered to their homes.
Overall retail leasing has since dropped by 17% year to date from the five-year quarterly average of 400,000 square feet and 83% down in the third quarter to date. Net absorption within shopping malls in the Greater Golden Horseshoe over the past 12 months slowed by 47% in the second quarter from a high of 165,000 square feet in the first quarter of 2023. Since the beginning of 2022, when adding the London CMA to the Greater Golden Horseshoe region, leasing activity increased by 22%, nearing 3 million square feet.
This elevated leasing activity bodes well for emerging retail markets surrounding the Greater Toronto area even as the market experiences a slowdown through the latter half of 2023.
Source CoStar. Click here to read a full story
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