A rush of U.S. retailers is being blamed for a sharp hike in lease rates for prime Calgary storefronts, but one high-profile American retail play has stumbled to an early exit.
“The influx of U.S. chains and luxury brands into Calgary contributed significantly to an overall increase in lease rates in the highly coveted retail locations,” said a recent retail report from Avison Young. The report noted that lease rates in Fourth Street SW and 17th Avenue SW, considered Grade A prime shopping zones, now average from $60 to $65 per square foot. This ranks among the top 10 most expensive retail space in Canada.
The arrival of U.S. low-cost giants such as Target and high-end leaders like Nordstrom, which opened its first Canadian store at Chinook Centre, J. Crew, Anthropologies and Urban Outfitters, are changing Calgary’s retail landscape, Avison Young added. A recent casualty is Montreal-based fashion retailer Jacob, which declared bankruptcy May 6 and shuttered its Market Mall location, its only Calgary store. A statement from Jacob blamed the “numerous international competitors who quickly stole market share from Canadian retailers.”
But the decision by Denver, Colorado-based Alberta Development Partners (ADP) to bail out of a planned multi-million dollar retail play at the Calgary Stampede grounds may show that the U.S. influx is slowing.
The Stampede deal, first floated in 2007, would have seen ADP developing a “main street retail area” between 12 Avenue SE and 14 Avenue SE, along Olympic Way SE. According to sources, ADP is no longer part of the proposed development of Stampede Park.
The developer and the non-profit Calgary Stampede could not reach agreement on leasing, while ADP had difficulty in arranging financing, sources say. Bruce Bynoe, principal at Avison Young, suggested the decision could also be tied to speculation on the future of the Scotiabank Saddledome hockey arena on the Stampede site.
John Crombie, senior manager of national retail services for Cushman & Wakefield Ltd. says it is more likely based on hard-nosed economics.
“There is a lot of publicity about American retailers coming here, but we are now seeing them turning back because [retail] sales have really rocketed back in the U.S. and the cost of entry in the U.S. is a fraction of what it is in Canada,” said Toronto-based Crombie.
Canada’s real estate is much more expensive than in the U.S. and supply chain costs are also much higher north of the border, Crombie explained, adding that Canada has a “much more controlled market” where it takes longer to get development zoning and construction completed than U.S. companies are accustomed to.
U.S. cities have many retail locations that are being sold or leased at discounted prices, Crombie added, a hangover of the financial crisis that has leveled U.S. real estate prices since 2008.
“The Americans come in and they want to pay X and we want X times two,” Crombie said.
“[Calgary] lease rates for prime shopping areas continue to surprise prospective out-of-town entrants,” Bynoe confirmed.
