Is small retail dying in Vancouver?

Combination of sky-high rents and property taxes are pushing out all but the biggest players. What can be done?

By
Macdonald Realty
April 30, 2018





A window display at Quince Fine Florals on MacKenzie Street. Photo Dan Toulgoet
A window display at Quince Fine Florals on MacKenzie Street. Photo Dan Toulgoet


It would appear as if “small retail” (the one-off boutique, the mom-and-pop shop, etc.) is steadily dying in this city.

The combination of high land prices (which translates into higher property values, higher property taxes and ever-higher rents), the continuing constriction of potential customers’ ability to access them (more bikes lanes, anyone?) plus the fact that Vancouver (along with being the geographically smallest major city in Canada) has never had a huge supply of commercially zoned land to begin with, is signalling the death knell of this city’s mom-and-pop operations.

The only retailers that can gut it out, especially during the crucial start-up mode, are the big guys with the deep pockets – the national and international chains. But do we really want to be a city of chain retailers and restaurants? Luckily, one can still frequent a few owner-operated cafes and restaurants around town (mostly on the outskirts, for the reasons noted above). And almost always the food is better and the prices are much better. Having a meal at one of the popular chain eateries in town now can easily set you back $60-75, and that’s without imbibing. It’s all based on what they have to pay to be there.

In a commercial rental, the tenant pays the landlord’s property taxes (based on the proportion of the overall space they occupy in a building), along with the same proportion of upkeep costs. And upkeep costs are getting mighty expensive. In many downtown buildings, they now rival the basic rental costs. It’s like paying twice to occupy the space, and much of that is property tax.

Why so high?

So, other than the obvious factor of land prices, why are Vancouver commercial property taxes so darn high?

One factor may be that the city’s property tax apportionment is currently split roughly 54/46 toward commercial property owners. An idea that has been floated is to bring that split a little closer to 50/50. And the provincial and municipal governments might both reconsider the formulas they use to assess commercial properties for the purposes of taxation from potential usage (what it’s zoned to accommodate) to actual usage (see a recent excellent article on this in Business in Vancouver).

Many people claim that much of the expense lies in City red tape in the zoning/usage approval process. I can personally attest to that at least partly being the case, having had tenant clients who wanted to occupy a space for a ballet school and had to apply for a change of use. It took them six months and cost about $6,000. The ironic thing was that before the immediately previous use, it had been a dojo, with the same general rules applying to it as my client was going to have to satisfy now!

Will anything change?

It’s no secret that many people in Vancouver’s business community (other than a select few) have felt somewhat abused or neglected over the last number of years by the current left-leaning city administration. And though Vision Vancouver has not yet confirmed it is fielding a mayoral candidate in this fall’s upcoming municipal election, should they support and be successful in backing an eventual left-leaning winner as mayor, will much change? Will it simply be more of the current situation of more bike lanes and no viaducts? It would be somewhat ironic if another left-leaning administration gained office only to foster a situation where the only retailers that could successfully exist in Vancouver were those headed by the “big bad” corporate chains.

One person who says he will shake things up if he wins is recently declared NPA candidate Ken Sim. And from his business background it appears that he might just be the person with both the ability and the desire to do it.

It would be doubly ironic if a former chain franchisor was the person who helped to bring back the small retailer to the City of Vancouver.


J. Neil Hamilton is a Senior Property Advisor with Macdonald Realty Ltd. with expertise in the buying, selling and leasing of both residential and commercial properties throughout the GVA. He can be reached at 604-499-7240 or neilhamilton@macrealty.com.
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