Vancouver retail insight

Rising rents and downtown recovery fuel Vancouver's retail market

February 28, 2024
  • Heli Brecailo
Market news
  • The Vancouver retail market is seeing increased demand even with economic uncertainty. Limited availability and rising rents are driving retailers to secure leases quickly.

  • Although retail sales have decelerated, some growth is expected in 2024, supported by a growing local tech sector and resilient consumer spending.

  • Ridership, the opening of new concepts at Amazon's The Post, and the rapid recovery of tourism continue to support the recovery of downtown Vancouver.
Strong demand for space despite economic uncertainty

The Vancouver retail-leasing market has been thriving, with significant rental growth over the past five years. Demand for retail space has outpaced supply, as evidenced by increased net absorption in 2023.

However, leasing volumes have gradually declined since their peak in 2022 as retailers face a softer outlook for consumer spending and a scarcity of premium spaces.

Vancouver remains an important hub for Canadian-based and international businesses. Retailers in the athletic, outdoor, and fashion sectors – including Adidas, JD Sports, Kit & Ace, and Esprit – have made expansion announcements.

Sustained demand has driven rental growth, but more recently inflation and rising property taxes have also been contributing factors, as landlords pass these additional costs on to tenants.

Construction activity has focused on the redevelopment of malls. The 1.2 million square foot Oakridge Park is scheduled for completion in spring 2025 and will feature a luxury component and the second Time Out Market in Canada.

While most space absorption has concentrated in general retail and neighborhood centres, mixed-use retail spaces should see a significant increase in absorption.

In conclusion, Vancouver's retail market is performing well, marked by limited availability and surging rents. Sustained demand is prompting retailers to secure leases quickly, and limited new construction activity is expected to keep the market tight.

Retail sales decelerate, but growth expected in 2024

Retail sales in Vancouver have shown a downward trend in recent years, although some real growth is predicted for 2024. While home improvement, home furnishings, and jewelry are out of favour, an appetite for electronics, shoes, and clothing has emerged.

A weaker housing market has softened the economic outlook for Vancouver, but prospects for consumer spending remain positive. The city benefits from an influx of immigrants, a recent boom in the local technology sector, and positive prospects for employment growth.

Full-service and limited-service restaurants have outperformed retail goods and are expected to continue growing, but at a decelerated rate in the single digits. This suggests that dining experiences remain relatively strong despite an overall retail-sales deceleration.

Sales growth by food establishment (province)

Ridership drives downtown recovery, Amazon's "The Post" welcomes new concepts

High transit ridership, including both local transit (TransLink) and regional commuter rail (BC Transit), has supported the recovery of downtown Vancouver. In Q3-23, BC Transit recovered 91% of its 2019 trip levels, while TransLink achieved 85% recovery.

"The Post," Amazon's office building in downtown Vancouver, is moving forward with the opening of its first concepts. Loblaws City Market, Fogo de Chão, and Evolve Strength fitness gym are just a few recent additions. Furthermore, The Post will feature a curated food hall, enhancing the overall downtown experience.

Tourism in Vancouver is seeing a rapid recovery, with visitor numbers approaching pre-pandemic levels. While Canadian visitors have returned, international visitors − particularly from China, Japan, and South Korea − are still lagging. Destination Vancouver recently reported that demand for hotel rooms is projected to surpass supply by 2026, which could result in potential revenue loss for the industry.

Rising hotel demand, coupled with restrictive Airbnb rules, has sparked a hotel boom, with three new large hotels planned for the downtown core.

Strong prospects despite softening retail sales

Despite the deceleration of retail-sales growth and a softer housing sector, Vancouver's retail market remains in demand due to its fast-recovering downtown area and a flourishing local tech sector. The opening announcements of The Post in the downtown area and Oakridge Park in the suburbs are expected to sustain the market's momentum.

Looking ahead, the long-term prospects for Vancouver's retail real estate market remain strong. The city's high number of immigrants and its role as a hub for international retail concepts contribute to the positive outlook.

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