Vancouver Urban Retail Report

Vancouver’s urban retail sector retains robust fundamentals

Market News

• Q4 2023 average asking rents across Vancouver’s 5 retail corridors stands at $130 per square foot.
• The number of direct ground floor availabilities totaled 37, or 6.2 percent of the storefronts in the corridors tracked by JLL.
• Robson Street and West 4th Ave remain Vancouver’s most active corridors.

Definitions:

Availability: Direct space that is actively being marketed for lease in one of the corridors tracked by JLL; includes space for future and immediate occupancy with at least five years of guaranteed term.

Average Asking Rent: Calculated using the straight-line average for direct ground-floor spaces that have frontage along one of the corridors tracked by JLL. Does not include sublets.

Average Asking Rent (All Corridors): The straight-line average of all direct, ground-floor availabilities with corridor frontage.

Vancouver thrives with an expanding population

Vancouver is poised for outstanding growth over the next five years, driven by impressive gains in population, GDP, and employment rate − all of which exceed the national average. As the largest market in Western Canada and third largest in the country, Vancouver boasts a favourable mix of economic sectors that skew toward higher-paying jobs. The region's vibrant lifestyle and weather act as a magnet, attracting young workers and fostering an influx of more than 50,000 new immigrants each year.

Vancouver's continued population growth is expected to fuel increased spending and business investment, particularly in the burgeoning technology sector. Technology companies have established offices in the region to tap into the pool of engineering talent, reduce labour costs, and avoid the challenges associated with U.S. immigration.

The redevelopment of the downtown The Post, home to Amazon, is emblematic of the region's progress in the tech sector. In 2019, Amazon − looking to secure world-class engineering talent − shifted its focus from a failed second headquarters in New York City to expanding its Vancouver hub.

Vancouver excels in housing

Vancouver has earned the unfortunate reputation of being the least-affordable housing market in the country, with rental prices nearly three times higher than in smaller cities such as Saskatoon. While homeowners benefit from increased equity, renters (and especially young people) face significant barriers to meeting their basic housing needs.

Despite these affordability challenges, Vancouver has emerged as a resolute national leader in housing construction, even with very limited available residential land. The city's skyline has undergone significant changes, with a variety of new developments and ongoing construction projects featuring tall residential towers.

Vancouver's high cost of living also does not overshadow its positive achievements in other areas. The city has been recognized for fostering an entrepreneurial spirit, ranking second in Canada in the number of startups according to the Urban Work Index, with an impressive 5,291 in 2022. In addition, Vancouver scores highly on transportation and climate action, boasts strong composting bylaws, and offers an abundance of nature trails that contribute to residents' well-being and quality of life.

Vancouver transit ridership rebounds

Transit ridership in Metro Vancouver has made an impressive comeback, now the fourth busiest transit system among North American cities. With an 85+ percent recovery, Vancouver has outperformed cities known for their rapid-transit systems, including New York, Toronto, Montreal, and Los Angeles.

However, this remarkable recovery poses a new challenge for Metro Vancouver's transit system: the risk of overcrowding in the coming years. Demand for public transit in Surrey and Langley has soared to 120 percent of pre-pandemic levels. In these rapidly growing communities, some routes have seen a staggering increase in ridership, more than doubling in the past four years.

Downtown Vancouver manages to soften perceptions

Downtown Vancouver has experienced one of the fastest recoveries among Canadian downtowns, according to mobility data from the University of Toronto. In terms of a recovery metric comparing the number of unique visitors with pre-pandemic visitor levels in 2019, downtown Vancouver has outperformed other major Canadian cities, as well as prominent West Coast metropolitan areas such as Los Angeles, San Francisco, and Seattle.

This helps to create a positive perception of Vancouver's downtown neighbourhoods, especially given challenges faced by downtowns across Canada and the U.S. − increased addiction, mental-health issues, and homelessness. Despite these prevailing negative perceptions, Vancouver's Crime Severity Index has declined significantly over the past 15 years.

Vancouver's downtown-revitalization data reinforces the notion that there is a clear link between a thriving downtown and the use of public transit.

Tourism surge expected to continue into 2024

Vancouver International Airport (YVR), Canada's second-busiest airport, anticipates a strong 23-24 winter season with passenger traffic expected to exceed 2019 levels. This positive outlook is due to the boom in B.C.'s ski resorts and YVR's significant efforts to regain traffic lost during the pandemic by restoring service, attracting new carriers, and expanding its list of destinations.

Air-passenger traffic in 2023 is estimated to have reached approximately 90 percent of 2019 levels, with much of the remaining gap due to a decline in Asia-Pacific travellers. While domestic passenger traffic has fully recovered, the return of Asia Pacific travelers has been slower due to limited flights from mainland China following its recent lockdown.

In turn, the Vancouver Fraser Port Authority (VFPA) is forecasting another record cruise season in 2024, with ship visits expected to match the 2023 record. In 2023, 332 cruise ships docked between April and October, accommodating a remarkable 1.25 million passengers − an increase of 54 percent over the previous year.

Looking ahead, Vancouver's tourism momentum is expected to continue, as the city has been selected by FIFA to host the 2026 World Cup. Over the next three years, Vancouver will also host the Invictus Games and the Grey Cup. These prestigious events will undoubtedly boost tourism and solidify Vancouver's position as a global destination.

Destination Vancouver anticipates a shortage of new hotel rooms starting in 2026

In a recent hospitality market study, Destination Vancouver projected that by 2026 demand for hotel rooms in the City of Vancouver will exceed supply. This will result in lost visitor spending, including lodging, dining, retail, and entertainment. As travel recovers from the shock of the pandemic, demand for hotel rooms is expected to return to pre-pandemic levels by 2025.

Three new hotels have been proposed (at 516-534 West Pender Street, 848 Seymour Street, and 717 Davie Street), and one opened in August (Azur, at 833 West Pender Street). Vancouver hasn't seen an increase in new hotel rooms in several years.

Robson Street − From Bute to Granville

The retail property fundamentals for Robson Street show signs of a robust recovery from the pandemic. Premium asking rents are approaching pre-pandemic levels, indicating a positive trend, and a wider range of rental rates suggests a more diverse mix of retail offerings on the street.

Nordstrom's departure from Pacific Centre has created opportunities for its shop-in-shop stores to find locations on Robson Street. This recent increase in demand for space has contributed to a decrease in overall availability compared with the peak in 2020.

Concessions and pop-up shops, once common, are now becoming scarce. This could be a sign of growing landlord confidence and a preference for longer-term leases. Retailers are signing ten-year leases, indicating a positive outlook for the market.

The athleisure trend continues to grow in the area, pointing to the importance of fitness and casual wear in the local retail scene.

Nearby, Alberni Street – a destination for high-end shoppers seeking luxury goods and designer fashions in the downtown core – continues to see increased demand for luxury brands, even with the suburban Oakridge Park and McArthurGlen Designer Outlet Vancouver.

West 4th Avenue − From Balsam to Burrard

Despite the challenges posed by the pandemic, West 4th Avenue has continued its upward trajectory to become one of Vancouver's most sought-after high streets. In particular, many clicks-to-bricks brands, along with the recent addition of accessories retailer Monos, have chosen West 4th as their first retail location in the market.

With availability rates remaining low, landlords are no longer considering concessions that were once on the table. The desirability of the Kitsilano residential area has strengthened their position and allowed them to maintain favourable lease terms.

Exciting redevelopment plans are underway on West 4th Avenue, specifically between Vine and Balsam Streets at 2346 West 4th Ave. The project, scheduled for completion by 2025, will introduce four retail units and one restaurant unit, further enhancing the street's appeal and providing new opportunities for retailers and restaurants.