Vancouver retail saw a divergence between urban and suburban locations in the latter half of 2022 as changes in consumer behavior and the toll of pandemic-related challenges forced more businesses to close. The impact of rising interest rates and inflation, alongside the continued prevalence of working from home in 2022, has resulted in a retail sector - that while still strong - is now entering a period of recalibration.
A softening economic outlook in the latter half of 2022 had the highest repercussions on urban retail, opening up some new vacancies. Urban “high street” locations saw an increase in vacancy, related to rising vacancy rates in Vancouver’s downtown office market and continued low foot traffic.
Suburban numbers were very different. Grocery-anchored shopping centre locations, especially those close to dense residential areas well-serviced by transit, have seen an incredible increase in demand. This scarcity of options has driven retailers to focus on new suburban developments, particularly in mixed-use developments in destination locations and high-density areas.
Some key insights from the report:
- The highest urban retail vacancy rates are in the Central Business District locations, including Robson (between Thurlow and Bute Streets), Gastown and Kitsilano.
- Tenants looking to locate in suburban areas are exceptionally challenged in finding options. As a result, the focus of demand is projects yet to be constructed, with the recently approved Broadway Plan a key target.
- With the Bank of Canada implementing seven interest rate hikes in 2022 to slow inflation, retail spending is moderating.
- E-commerce sales are hovering at around 6% of total retail sales, a strong indicator for the value of bricks and mortar retail.
- Consumers appear to be reigning in spending as a result of inflation; however, there has been a surprising growth in the clothing and fashion sector, with an increase of 27% year to date in fashion spending across Canada; this while other sectors such as car dealerships and electronics stores are struggling.