A combination of land, location and the necessities of life are keeping retail assets in demand in Western Canada, despite the risks to discretionary spending posed by tariffs and other economic headwinds.
“Retail is the top use and demand for all investors, and most of the retail that is trading is open malls,” said Bob Levine, principal with Avison Young (Canada) Inc.’s capital markets group in Vancouver. “There are enclosed malls changing hands, too, but the open malls tend to be convenience-oriented. … If there is a downturn in consumer spending, they won’t be affected as much.”
Avison Young’s annual review of B.C. investment sales over $5 million reported $1.2 billion in retail transactions in 2024, even with a year earlier.
Grocery-anchored centres saw strong demand in the second half of the year, typifying investor confidence in retail assets, particularly those serving up staples.
One of the largest assets to trade last year was Willowbrook Park in Langley, picked up by Shato Holdings Ltd. for $137 million in a deal brokered by Colliers and Sitings Realty after just four months on the market.
Levine is currently working on deals for three malls, including Riverside Heights Shopping Centre in Surrey and Penticton Plaza in Penticton. Both are grocery-anchored neighbourhood malls, and both are under contract.
The third is not officially on the market, but buyer interest has driven the opportunity to sell and the kind of pricing that makes offers difficult to refuse.
Buyer interest, particularly in British Columbia, stems from the strategic locations many malls occupy and the sheer volume of land they require.
“Shopping centres by their nature consist of a lot of land, and because they consist of a lot of land, particularly in places like British Columbia, there’s no new ones being built,” Levine said.
This means B.C. has traditionally been under-retailed versus other markets, and the malls that have been built are increasingly redevelopment opportunities.
Riverside Heights is a case in point. Situated on 6.9 acres, marketing materials describe the 64-year-old mall as “prime redevelopment land at a prime intersection.”
The current mall is 101,833 square feet with room for additional retail pads. There is also potential for a partial or full redevelopment of the existing mall, which is currently leased at rates 50 per cent below market. Renovated in 1998, a new round of upgrades could justify significantly higher rents.
It’s not the only example.
Wesbild Holdings Ltd. acquired PoCo Place from Artis Real Estate Investment Trust last year as the REIT disposed of assets as part of a long-term repositioning strategy.
Built in 1980, the 100,000-square-foot open mall includes a 60,000-square-foot office block on 8.5 acres. Wesbild intended “to enrich the retail experience” at the mall when it announced the purchase and has since set forth a vision for a four-phase redevelopment plan that would pare back the retail component to 80,000 square feet while developing 2,000 residential units across six towers.
The proposals follow on the success of a number of transformative projects at enclosed malls around Metro Vancouver.
The makeovers Brentwood and Lougheed Town Centre have received at the hands of Shape, as well as Cadillac Fairview’s redevelopment of Richmond Centre, are examples of retail-anchored mixed-use projects.
Mayfair shopping centre on Vancouver Island is another example of a mall that has undergone a makeover to better tailor it to shifting market dynamics.
“Enclosed malls started the trend, because they’re the ones that had serious vacancies with major tenants going out of business,” Levine said.
The demise of Hudson’s Bay is the latest challenge facing enclosed malls. The venerable retailer is among the last of the iconic Canadian department stores that included Eaton, Simpsons, Sears and Woodwards – all now memories.
Its departure could open up vast chunks of retail space across the country, including at major malls.
Potential benefits
Primaris REIT acknowledged the risk in announcing its sale of St. Albert Centre to Montreal-based Leyad for $60 million on March 31. The mall’s anchor tenant is Hudson’s Bay, which occupies 93,000 square feet of the 352,812-square-foot mall. St. Albert Centre was 97.3 per cent at the beginning of January but the departure of the Bay would deliver a significant hit.
Selling the property was not an escape strategy for Primaris, however, but part of a series of dispositions of lower-performing assets to sharpen its focus on growth.
Same-store sales productivity at St. Albert was $556,000 per square foot in 2024, among the lowest in Primaris’ portfolio and well below the portfolio average for enclosd malls of $705,000 per square foot. Together with the disposition of Sherwood Park Mall in February to a private investor and developer for $107 million, Primaris said it managed to boost same-store sales productivity to $752,000 per square foot.
“We have enhanced the appeal of our enclosed shopping centre portfolio to our retailer tenants and shoppers,” it reported April 1.
The pending loss of Hudson’s Bay by June 30 would further benefit its performance, given the brand’s limited appeal to consumers, declining operating performance and lack of investment in its stores.
“Primaris believes that the departure of HBC’s tenancy will be beneficial to the REIT over the medium term, and sees significant upside in the longer term,” it said.
But its departure could also create buying opportunities, Levine said.
“It’s going to affect some properties significantly around the province, and maybe that will trigger some properties coming to market,” he said.
While the loss of an anchor tenant like the Bay means any properties that do come to market could trade at a significant discount, the rarity of enclosed malls is likely enough to offset the discount occasioned by the loss of any one tenant, even a major one.
“They’re performing, impossible to replace,” Levine said.
Cottonwood Centre in Chilliwack shows what’s possible in the face of vacancies.
PCI Group and Nicola Wealth Real Estate bought the property in 2019 with ambitious redevelopment plans for what was then a 35-year-old asset with significant chunks of vacant space left by Target and Sears.
PCI undertook $30 million in renovations and successfully backfilled the vacancies with Save-On-Foods and other retailers, successfully repositioning the property for the future.
PCI has seen fresh interest from investors in the property, signalling the importance of renovations and even newer assets that don’t require significant capital upgrades.
The national investment team at brokerage JLL Canada recently closed on The Market at Quarry Park, a 15-year-old grocery-anchored centre on 10.3 acres in Calgary. It is also marketing Cochrane Towne Square, a former Canadian Tire location reimagined as a 55,000-square-foot grocery-anchored mall with strong prospects for rental growth given local demographics.
On Vancouver Island, Metral Station, a six-year old retail centre received multiple offers last year and eventually sold to Myla Properties of Mackenzie, B.C., for $15.9 million. A smaller mall anchored by Starbucks, Metral Station reflects the opportunities available to investors.
“This prime retail destination is positioned for continued growth, with the surrounding area projected to see a 13 per cent population increase by 2027,” Myla says in its description of the acquisition.
