Colliers Spring Retail Report

U.S. Retailers Will Shape the Future of Canadian Shopping: Colliers Retail Report Spring 2013

--  Soft sales performance into 2013 intensifies the competition between retailers; consumers likely to see lower prices --

Vancouver and Toronto, May 29, 2013 – The continuous influx of U.S. retailers into Canada is expected to have a lasting impact on Canadian retailers and consumers, according to Colliers International’s 2013 Spring Retail Report released today. The entrance of U.S. retailers is already one of the drivers behind the retail building boom Canada has experienced in recent years, with an average of 11.5 million square feet of leasable shopping area added annually and tens of millions of square feet currently under construction. This addition of shopping space to the national inventory, while very large, is not likely to lead to a market bubble, provided Canada continues to demonstrate strong economic and population growth. It will, however, undoubtedly put more pressure on local retailers by potentially driving shopping mall productivity levels downward, something that U.S. retailers are better adept to manage.

“Canada and the U.S. have been in a virtual lockstep in terms of shopping centre floor area per capita ratio for the past decade. Even with the massive retail development, Canadian retailers have consistently had a smaller shopping area per capita, which contributed to a low vacancy rate and high shopping mall sales per square foot productivity,” says James Smerdon, Vice President and Director, Retail Consulting with Colliers International. “We are encouraged to see that so far, new supply is being supported by growth in demand. Going forward, aggressive price discounting or excessive supply growth could be hard for some Canadian retailers and some regions to absorb.” 

Retail Report Spring 2013 - Shopping Centre Square Feet per Capita chart

According to the Colliers retail report, the increasing pressure for Canadian retailers to compete on price as well as shopping experience to match the look and feel of their U.S. competitors (both on and offline) is a key driver that continues to shape the Canadian shopping experience.    

“We already see Canadian retailers increasingly adopting U.S.-style sales and promotions such as Black Friday and Cyber Monday sales, as well as other discount pricing strategies, to keep consumer spending at home,” adds Smerdon. “There is no doubt that the retail competition on Canadian soil will continue to intensify in the coming years. The recent step by Canadian Tire and Loblaws to spin-off their real estate into REITs is further evidence that Canadian retailers realize that their greatest asset might not be what’s in the store, but the store itself.”

Market Performance and Provincial Breakdowns

In addition to the need to keep an eye on increased competition from the south, declining consumer confidence, lower than expected employment growth rates and high household debt have softened retail performance during the second half of 2012 and into 2013. Net of automotive and gasoline sales, second half of 2012 retail sales totaled $161.81 billion, a marginal 0.45 per cent increase compared to the similar period in 2011. This was coupled with lower than expected December 2012 sales, which were lower than the 2011 volume by over $1.1 billion or 3.3 per cent.

“No doubt Canadian retailers are being challenged on a few fronts,” adds David Bell, Senior Associate with Colliers International. “With consumer confidence levels remaining low, lingering concerns over household debt levels and uncertain economic and employment growth prospects both at the national and provincial levels, Colliers forecasts year-over-year retail growth in 2013 to remain modest.”

Retail Report Spring 2013 - 2013 Year to Date Retail Trade by Province chart

Net of automotive and gasoline sales, the provinces of Saskatchewan (3.4%), Alberta (3.2%) and Newfoundland (2.2%) experienced the highest year-over-year retail sales growth to date in 2013. The province of Quebec (2.1%) is also well-positioned above the national level of 1.2 per cent year-over-year sales growth. Ontario and British Columbia were off to a slow start in 2013, yet they did better than the rest of Atlantic Canada.

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