Commercial Real Estate on the Rise

Jonathan Paglialunga, Staff Writer

Due to the significant and prolonged nature of COVID-19, many small businesses have been forced to shut down or reduce their storefront presence, creating a surge in real-estate availability. As a direct result, large organizations who either withstood the impacts of the pandemic or successively adapted to the online atmosphere have since been exposed to a wide array of discounted real estate opportunities.

Among these various companies lies Aritzia Inc., which is making strides in this unprecedented environment to secure new retail locations. Aritzia Chief Executive Officer Brian Hill stated, “We’re continuing to open and sign lease deals. We’ve never seen real estate opportunities as we’ve seen right now.”

Royal Bank of Canada analysts Irene Nattel, Alex Carette, and Martin Gravel established that the “current environment is likely to surface compelling real estate opportunities” for companies like Aritzia, believing this expansion will drive extensive returns.

These economic circumstances pose opportunities for North American enterprises as well as international retailers who realize that real estate opportunities allow for easy expansion into new markets despite the ongoing pandemic. Subsequently, Retail Insider reported that at least 13 international brands have made ventures into Canada during 2020.

Among the 13 companies making the transition, QuanU, a Chinese furniture retailer, opened its first location in Toronto in July and plans on opening between 10 and 15 new locations in the upcoming year. 

According to Bruce Winder, the president of industry consultancy firm Bruce Winder Retail, “There’s going to be industry consolidation here. It’s one of those situations where the strong are going to get stronger and bigger and the weak are either going to be bought up or probably liquidate.”

CBRE, a leading real estate company released their fall 2020 retail report noting that the total national vacancy rate increased by 1% to 4.1% from the end of 2019 to July 2020, which is one of the largest half-yearly increases on record. The Canadian Federation of Independent Business estimates that 181,000 businesses are considering permanent closures in 2021, meaning there will be an abundance of available property at a discounted price.

Due to the online experience provided by retailers during the pandemic, some customers might find comfort in receiving their deliveries at the front door. On the other hand, customers might also want to experience retail shopping in a post-pandemic atmosphere. Winder suggests that these locations might serve a unique purpose during the pandemic. “Many stores are becoming last-mile pickup spots or last-mile shipping spots for merchandise, it’s called the ‘dark stores’. And what they do is they actually leave stores dark and use the real estate not so much as a store for shoppers, but as a mini-warehouse to pick and pack inventory for that neighborhood” stated Winder.

Jennifer Marley, partner at Sklar Wilton & Associates, stated, “I think that consumers are tired of not being able to have that more interactive experience with being able to touch, feel, try on, look at different colors, be motivated by different styles.”

It appears that the question of how extensively the COVID-19 pandemic and its aftermath will influence shopping patterns currently remains unknown. Will the pandemic see a permanent decrease in storefronts, or will the turnover of real-estate reestablish the need for a physical retail environment?

Photo by Arturo Rey, Unsplash

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