Real estate brokers say they’re seeing “renewed interest” in empty downtown retail spaces that were vacated during the pandemic – but some caution it could be years before the city’s core returns to pre-COVID occupancy levels.
Kevin Houlahan, a sales representative with Colliers who specializes in retail, says that while leasing typically “grinds to a halt” over the summer, there was “always some activity” this year in the area of town hit hardest by the shift to remote work and events such as the convoy occupation.
“It’s less of a doom-and-gloom story, that’s for sure,” Houlahan said. “I think we’re definitely seeing positivity there.”
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Houlahan noted that some building owners are still “being creative” by offering inducements such as rent holidays for tenants during slow sales periods.
At the same time, though, brokers say rents have remained relatively steady at as much as $50 per square foot in more sought-after parts of downtown such as Elgin Street and the Glebe and around $30 per square foot along Bank Street in Centretown.
In fact, Houlahan said asking rents in trendy neighbourhoods like Westboro have risen as much as 10 per cent over the past year, suggesting things are looking up for the sector.
Candice Lerner-Fry, head of the retail leasing division at Marcus & Millichap, said the federal government’s move to bring public servants back into the office a minimum of three days a week starting Sept. 9 should drive more foot traffic to retailers in the core and cause rents to rise even further.
“An extra day a week (of federal workers being in the office) is good for the economy,” she said. “Right now, landlords are still very aggressive at making deals happen, but I think shortly we’re going to start seeing rents going up. By next spring, I feel like rents are going to absolutely escalate in the downtown core.”
Michael Simon, a broker with CLV Realty, said inquiries from tenants looking for retail space downtown have “really picked up” over the past few weeks after what he described as a “very slow” summer for the leasing sector.
“People are starting to get back to business,” Simon said, adding much of the spike in activity is coming from professionals such as hairdressers, massage therapists and physiotherapists.
“A lot of them have been working out of their houses or a smaller area and have decided to open up a business because they’re doing so well,” he explained. “They want to be central because they have clientele from the east, west and south.
“They can’t find space in the suburbs because the suburbs are pretty tight. In order to make it convenient for their clientele, they’re starting to think of going central.”
Like Lerner-Fry, Simon said the extra day of in-office work from federal employees should pay dividends for downtown merchants and accelerate the area’s retail recovery.
“I’m hoping within the next year that we’ll see more of a stabilized rental market in these central locations,” he added.
Centretown ‘just doesn’t have any appeal’
However, veteran broker Brent Taylor said there are still “some trouble spots” for downtown retail landlords, particularly along Bank Street north of the Queensway.
“If you go along Bank Street, the Glebe is extremely strong, and then once you hit Centretown, it’s very weak,” explained Taylor, the owner of Brentcom Realty Corp.
“That part of Centretown just doesn’t have any appeal. It’s looking quite run-down as you drive or walk through there. Until some of the new developments start to actually surface, I think it’s (going to be) a little bit rough down there.”
Taylor said many landlords “just seem to be waiting until the right tenants come along” and are content to keep their spaces empty for now.
He’s not quite as optimistic as his counterparts that the downtown core is on the cusp of a full-scale retail revival.
“The proof is whether a place rents or not,” he said. “I’m not hearing about a lot of deals in Centretown.
“I’m afraid to say it, but it might be more like two or three years before it really turns the corner in those areas.”
But Houlahan says the overall retail picture is brightening as interest rates fall, supply-chain bottlenecks that plagued manufacturers during the pandemic ease, and federal civil servants head back downtown to the office more often.
“It’s only going to get better as we go forward from here,” he said. “I think the darkest days are behind us.”
