A new analysis of Ottawa’s commercial real estate market says the retail sector is gaining momentum as demand for space outstrips supply in many neighbourhoods, especially in the suburbs.
Re/Max Canada’s 2024 Commercial Real Estate Report, which examined a dozen major Canadian markets, including Ottawa, during the first quarter of the year, says the local sector is performing “stronger than expected” as overall availability rates continue to drop.
“Consistent demand for retail properties exists, but supply remains tight,” the report explains.
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Investors particularly covet strip malls, Re/Max says, but new inventory remains scarce as “most developers are not interested unless the land size and zoning are appealing.”
The findings closely mirror the company’s analysis of the overall Canadian retail sector. The report said neighbourhood retail is generally performing well across the country, despite the popularity of e-commerce, thanks to a shift toward service-focused stores from those selling goods such as clothing.
Re/Max’s assessment seems to align with what some local observers are seeing right now.
Kevin Houlahan, a sales representative with Colliers’ Ottawa office who specializes in retail space, says he believes the local market has “turned a corner” as brick-and-mortar merchants stage a revival following the rush to online commerce during the pandemic.
“The number of calls and the interest in (retail) sites is definitely way up,” Houlahan said.
Space in suburban plazas is at a premium as retailers respond to a surge in demand from consumers who want to shop closer to home, he explained.
“You’re seeing multiple offers on sites,” Houlahan said. “Real estate has always been about location, and when it comes to retail, never more so than now. We’re catering to consumers’ demands for convenience. When they want it, they want it now.”
Construction of new retail properties ground to a halt over the past few years as developers grappled with soaring costs and interest rate hikes made financing major projects more expensive.
As a result, suburban retailers are now facing a space crunch, Houlahan explained.
But he said he thinks this week’s rate cut from the Bank of Canada, along with growing clarity around return-to-work strategies, could trigger a new wave of retail builds in Ottawa.
“If the demand is there, I think it lends itself to that development.”
Montreal men’s-wear designer coming to Slater Street
Meanwhile, Ottawa’s beleaguered downtown core is slowly starting to recover after a flurry of “for lease” signs sprang up during the COVID-19 crisis, Houlahan added.
While acknowledging that bankruptcy and delinquency rates among retail businesses are still “very, very high” by historic standards, he said the industry is finally seeing signs of hope.
“It’s definitely better than it was a year ago,” Houlahan said, pointing to “renewed interest” from “unique” retailers such as Montreal-based custom men’s wear designer Suitablee, which uses a state-of-the-art artificial intelligence platform to produce made-to-order suits, dress shirts and other garments.
Suitablee, which currently operates two showrooms in the Montreal area, is opening a store in an 850-square-foot space at 275 Slater St. later this summer.
Houlahan says it’s just one of a number of national and international retailers ranging from big chains to boutique operators that are looking to plant a flag in the National Capital Region thanks to the capital’s relatively high average income and stable economy.
“When they look for new markets, it’s not just always your Torontos, Montreals and Vancouvers,” he said. “They’re broadening their scope to look at Ottawa. There’s a strong market here.”
Quick-service restaurants are among the most active seekers of space, Houlahan noted.
Taco Bell, for example, plans to open a new location in the Théo student residence at 305 Rideau St. this fall.
On the western edge of downtown, a Kingston-based restaurant group is in talks to take over about 7,000 square feet of space at Minto Place. The site was previously occupied by Madisons Restaurant & Bar, which elected not to renew its lease and shut down about a month ago.
“It would be a great addition to the site,” Houlahan said of the new restaurant.
Other types of brick-and-mortar tenants are also emerging as consumers thirst for experiences beyond shopping at traditional retailers such as clothing and food stores, Houlahan noted.
As an example, he pointed to Winnipeg-based immersive gaming chain Activate Games.
Houlahan said the company, which already has outlets in Alberta, Ontario, British Columbia, Nova Scotia and Saskatchewan as well as several locations in the United States, has a “strong interest” in expanding to Ottawa as it looks to add 20 new stores across the U.S. and Canada.
While Activate generally sets up shop in suburban areas, Houlahan said he wouldn’t be surprised if “some sort of entertainment group” ends up occupying at least part of the former Nordstrom department store in the Rideau Centre.
“The way we view traditional retail is changing,” he said.
The 157,000-square-foot space in Ottawa’s busiest shopping centre has been empty since the Seattle-based retail giant vacated the mall nearly a year ago.
While Rideau Centre owner Cadillac Fairview has been tight-lipped about its plans for the space, it has begun revealing the retailers that will replace Nordstrom at its malls in other Canadian cities.
The company announceed Thursday that Quebec-based department store chain Simons will be joined at the former Nordstrom space in Toronto’s Eaton Centre by Nike and food emporium Eataly.
– With additional reporting from the Canadian Press
