‘No weakness’ in Ottawa Train Yards’ tenants or location, veteran retail broker says

Ottawa Train yards
The Ottawa Train Yards houses over 750,000 square feet of retail space covering over 110 acres of property.

The Ottawa Train Yards remains a “fantastic” site for retailers even as part of the shopping complex has been placed in receivership, a leading real estate broker says.

“It’s got a great tenant mix,” Jamie Boyce, a senior vice-president in CBRE’s Ottawa office who specializes in retail leasing, told OBJ on Thursday. 

“I’m not sure what’s happened behind the scenes, but I would say that whatever is ongoing is an anomaly. I see no weakness in that particular roster of tenants and location.”

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The Ontario Superior Court of Justice last week appointed Grant Thornton Limited as receiver and manager of the assets of a portion of the Ottawa Train Yards, which is located on Industrial Avenue west of St. Laurent Boulevard.

According to legal documents on the Grant Thornton Limited website, The Manufacturers Life Insurance Company (Manulife) filed an application for Grant Thornton to be appointed the receiver of all assets after the owner of a portion of the shopping complex failed to make payment on an outstanding loan. 

141 Ontario is the owner of a 23.2-acre commercial site on the north side of Industrial Avenue. According to the court documents, Manulife extended a $45.5-million loan to 141 Ontario in December 2018 that matured and became payable on Feb. 1, 2024.

However, 141 Ontario failed to repay the loan upon maturity and, as of March 21, 2024, $39.5 million remained outstanding. The loan continues to accrue interest at the rate of $3,651 per day, the documents showed.

With more than 750,000 square feet of retail space, the Ottawa Train Yards is one of the city’s largest shopping malls. The complex is home to more than 150 retailers, services and restaurants.

But a number of the mall’s former tenants have closed up shop in the past couple of years, including fashion retailer Nordstrom Rack, housewares chain Bed Bath & Beyond and children’s furniture store buybuy Baby. Those spaces remain vacant.

Still, Boyce says the Train Yards’ tenant roster is “very solid” despite the exodus of some big-name retailers, adding the mall “remains a highly desirable location geographically and comparatively” to other similar shopping complexes in Ottawa.

“I know there are tenants that are interested in being there for sure,” he said.

Analysts say the Ottawa retail market remains healthy as available real estate continues to be hard to find and sales keep rising. 

A report earlier this year from brokerage firm Marcus & Millichap said Ottawa’s retail vacancy rate hit an all-time low in 2023. The firm predicted the rate will fall another tenth of a percentage point to about 1.5 per cent this year, “making Ottawa one of the tightest retail markets in 2024.”

While some industry observers are forecasting a slowdown in overall retail sales growth this year, Boyce said Ottawa is “still undersupplied” when it comes to large, outdoor suburban shopping complexes.

Often referred to as “power centres,” such properties in the National Capital Region include Barrhaven’s Chapman Mills Marketplace, Nepean’s College Square mall and Kanata Centrum Shopping Centre.

“Those are all landmark retail locations that Train Yards would compare with,” Boyce explained, adding “those properties are very, very well occupied with very little vacancy.”

A lack of new construction has magnified the problem as developers put major developments on hold when the Bank of Canada hiked interest rates in an effort to smother inflation, analysts say. 

Just 90,000 square feet of new space was added to Ottawa’s retail inventory last year, according to CBRE, and the firm is projecting no new developments to come online before the end of 2024.

Boyce said the lack of new retail builds in Ottawa “is consistent with major markets across Canada.” 

But construction activity could start to pick up again if the Bank of Canada follows up its recent rate cut with more reductions over the next 12 to 24 months, he added.

“It’s just very expensive to build,” Boyce said. “For a developer or retailer to build and occupy, they need to have an exceptional sales (forecast).”

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