The sale of the Carlingwood Shopping Centre could pave the way for a new mixed-use “ecosystem” that would eventually see condo towers built at the 30-acre site, real estate and retail experts predict.
Ottawa’s fifth-largest mall was recently put on the market in a move that TD Cornerstone Commercial Realty, one of the brokerage firms shopping the property to prospective buyers, calls a “rare opportunity” to acquire a “high-quality, well-tenanted” retail property with a “stable cash flow and meaningful future development potential.”
The 632,700-square-foot retail complex’s marquee tenants include Loblaws and Canadian Tire, which opened its largest location in the country at Carlingwood last fall.
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The two-level, 263,500-square-foot Canadian Tire outlet was built on the site of the former Sears department store that was demolished after the chain went bankrupt in 2017. The retailer has 19 years remaining on its lease.
Opened in 1956, Carlingwood now has about 94 stores and services, including anchors such as Rexall and Dollarama. It’s also home to a fitness centre and three banks.
While the mall continues to be a retail hub in a growing neighbourhood just a stone’s throw from the Queensway and less than a kilometre from the future New Orchard LRT station, some experts believe its real value lies elsewhere – in real estate.
TD Securities director of real estate brokerage Elliot Medoff declined to comment on potential development opportunities at the site, citing client confidentiality.
But Carleton University professor Ian Lee, a close observer of the local retail sector, says he believes the property will be sold to a real estate developer looking to build highrise condominiums on the parking lots surrounding the shopping centre.
“This is a real-estate play,” says Lee, who teaches marketing at the Sprott School of Business. “The buyer will not be buying this because they want to become a shopping mall operator so much as to get that land.”
Ottawa’s ‘centre of gravity’ shifting
Considered a “suburban” mall when it first opened, Carlingwood has become comparatively closer to the city centre as Ottawa has grown, Lee notes, making it a desirable spot for residential development that’s not quite downtown but still easily accessible to the core.
“As the centre of gravity shifts westward, that land becomes more valuable,” he explains.
“How many large-area, flat-surface parking lots are … sitting around in prime parts of Ottawa? That land is too valuable now to just sit there as a parking lot. They will develop that land, and I’m sure that they will be developing it into condo towers, because then you can really maximize your return on that land.”
An influx of residents next to the shopping centre would also give tenants like Loblaws and Canadian Tire a captive new customer base, Lee adds.
“You’ve got a built-in little ecosystem there that makes those condos more attractive,” he says. “That’s a classic example of what will become a mixed-use neighbourhood.”
Toronto-based retail analyst Bruce Winder echoes Lee’s thoughts.
Carlingwood is a mid-tier mall that doesn’t offer as many high-end retailers or as wide a variety of stores as bigger shopping centres like the Rideau Centre, Bayshore and St. Laurent, he notes.
Winder says the new owners will likely look to get the most out of their purchase by redeveloping land that’s currently being underutilized as parking.
“That’s probably the biggest trend right now with malls that are sort of in that category,” he says. “(Carlingwood) has obviously got some good anchors. I think maybe the opportunity is to build around those anchors. You create this city within a city.”
There’s already precedent for such an approach in Ottawa.
For example, two other major retail complexes on the Carling Avenue corridor, Lincoln Fields Shopping Centre and the Westgate Shopping Centre, are being redeveloped with mixed-use residential and commercial towers as part of owner RioCan REIT’s effort to reinvigorate mid-tier properties that have been hit hard by the growing trend toward online shopping and changing consumer buying habits.
But whether all of those acres of asphalt at Carlingwood could be replaced by condos is uncertain.
When it was the mall’s flagship tenant, Sears had an agreement with Carlingwood’s management that prevented any development in the south parking lot so as to guarantee the retailer had visibility from Carling Avenue.
CBRE senior vice-president Jamie Boyce says he wouldn’t be surprised if Canadian Tire has a similar arrangement with Strathallen Property Management, the mall’s current operator.
“I don’t think the future owner may have the latitude that RioCan had with Lincoln Heights,” Boyce explains, noting Walmart’s departure from that mall in 2016 helped smooth the path for redevelopment of the site.
Strathallen and Canadian Tire did not respond to messages from OBJ this week.
Even if some of the Carlingwood property is off-limits to future development, Boyce thinks there will still be plenty of suitors for the mall and the adjoining land.
He says the list of potential buyers could include “private-equity, high-net-worth” funds, real estate investment trusts such as CT REIT and Choice Properties REIT that already have strong owner-tenant relationships with Canadian Tire and Loblaws, or perhaps even Strathallen.
“It’s a great location within the city. I think it services that market well, and I think the underlying dirt has great long-term value to it,” Boyce says. “It will be a bellwether for our market to have a gauge on who the active buyers are and where the market actually is.”
Lee agrees Carlingwood will attract plenty of interest from investors motivated by the three most important words in real estate: location, location, location.
“That’s prime land,” he says. “I think there’s more demand for condos there than there is downtown.”