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US Retailers Hit Homeruns in Canada

June 13, 2012

I recently read a fascinating piece (on Reuters.com) about the Canadian retail climate. This article provided insightful data as to why US retailers enjoy greater productivity in Canada than in the US. The feature also highlighted key socio-economic factors which are important considerations in assessing why the US retailers are more successful north of the border. To paraphrase the article, the key determinants are as follows:

1. Canada's banking sector is amongst the soundest in the world

2. Canada has a buoyant housing market and consumer spending robust

3. Canadian Shopping malls are 43% more productive than their US counterparts;

4. Top malls in Canada generate $1000-$1300 per sf compared to premium US malls which report sales of $650-$850 psf

5. According to the ICSC, Canadian shopping malls on average perform $589 per sf, compared to $412 per sf in the United States 

6. The higher productivity is result of Canada having fewer malls per capita than the US (15 square feet of space vs 24 feet)

7. US retailers charge higher prices for goods and commensurately enjoy higher profit margins

Our clients have experienced tremendous success in Canada. The majority boast 20-25% sales increase in Canadian locations. Commensurately, these retailers have significantly increased (in many cases doubled) their forecasted store openings for Canada.

It's the classic if you build it he will come theory. And to Canada, the brands keep coming. 

J Crew, Microsoft, Vans, Watch Station, Ann Taylor, Express, Chicos, Under Armour, Ultra, Kohls, Marshalls...etc. These names represent a partial listing, of those US retailers, who have (either) recently opened in Canada or have announced their market entry. 
Who's next? That's simple. 

Target. You may have heard that they acquired 185 leases from (Canadian department store chain) Zellers and will open these locations in 2013. In addition they will invest $10M to re-furbish each location. Not too shabby. 

Are there other major retail brands looking to enter Canada? The answer is a definitive yes. 
Cadillac Fairview (CF), Canada's leading super regional mall landlord, just acquired leases from Sears Canada in three of their top performing malls: Pacific Centre (Vancouver), Rideau Centre (Ottawa), and Chinook Centre (Calgary). CF has exciting plans to re-develop these properties, and it is widely expected that Nordstrom will be the anchor in these sites.  

What else do I need to know? 

For retailers seeking outlet growth, with no less than 7 new outlet centres announced to open in 2013\2014, Canada is quickly becoming the hot-bed for outlet retail. In total, approximately 2.9 million square feet of outlet retail will be built during this period. Simon is set to launch Premium Outlets in Toronto and Montreal; Tanger will open a new centre in Ottawa, and expanding existing malls in Cookstown, Ontario and Bromont, Quebec; Ivanhoe will open the Niagara Outlet Collection in Niagara, Tewassan Mills in Tewassan, British Columbia.They will also expand their very successful Vaughan Mills centre. Finally (but certainly not least), in 2014, UK based McArthur Glen, will unveil their upscale Vancouver Designer Outlet. 

In addition to the above, there are several top tier super regional malls that have announced major re-development programs. These would include: Pacific Centre (British Columbia), Chinook Centre (Alberta), Polo Park (Manitoba), Rideau Centre (Ontario), Bayshore Shopping Centre (Ontario),Guilford Centre (British Columbia), Park Royal (British Columbia), Pacific Centre (British Columbia), CHinook Centre (Alberta), Polo Park (Manitoba), Rideau Centre (Ontario), Bayshore Shopping Centre (Ontario), Promenades Saint Bruno (Quebec). 

Given the plethora of tremendous first class projects soon opening, now is the time for those US and international retailers to escalate and finalize their discussions regarding Canada. It's time to GREEN LIGHT CANADA! 

From a financial perspective alone, landlords now have capital budgets for tenant inducements and greater flexibility to invest same in high performing top covenant brands. This is a unique time - Canada is now hungry for US and internationally branded retailers.

I am attaching a couple of articles that I believe are topical.

1. Canada's Retail Market Ripe for American Invasion - The Star.com

2. Outlet Retailing Canada-Style - Value Retail News

Think Retail has successfully developed and implemented Canadian market entry programs for companies such as Fossil, American Apparel, Pinkberry, Bare Escentuals, Le Creuset, Watch Station, JNBY...etc. We secure flagship locations in all major Canadian cities on behalf of a wide variety of best in class globally recognized brands and top domestic regional chains. We are value added and leave no stone un-turned to ensure that our client's real estate objectives are quickly achieved.