Toronto’s retail market is heating up as post pandemic pent-up demand is finally unleashed, and CBRE’s Urban Retail Team have been at the centre of the action.
There’s been a substantial uptick in closed deals, which were up nearly 60% in the second quarter versus the first, according to CBRE Research. And while Q2 2020 saw street-front retail investment hit bottom, down 35% from 2019 levels, Q1 2021 was among the most active quarters on record, with $181 million in retail properties traded.
Arlin Markowitz at The Well
All is ‘Well’
All is certainly well at The Well, the RioCan REIT and Allied Properties REIT mixed-use megaproject at Front and Spadina.
To date, RioCan has executed leases for 110,000 sq. ft. of eat, shop and experience space. This includes 60,000 sq. ft. for a series of distinct and diverse eateries under separate banners, to be curated by a leading Canadian hospitality company known for unique and innovative restaurants and event venues. In addition, a 6,500 sq. ft. commissary kitchen and 11,000 sq. ft. of restaurant space at the top of The Well’s office tower have also been committed to.
On top of this, 24,000 sq. ft. has been leased at The Well to Sweat and Tonic, a fitness and wellness hub; 16,000 sq. ft has been leased to Shoppers Drug Mart; and 10,000 square feet leased to tenants that cater to everyday needs such as banking and barista style coffee. First possession of the retail space is anticipated for 2022.
The deals contribute to The Well’s exceptional retail experience, which will boast unique local and international brands and concepts. “There’s been nothing like this in Canada before,” says CBRE’s Alex Edmison. “There’ll be seven towers of office and residential all connected in the middle by the retail, which will be covered by a stunning glass canopy so you can enjoy the amenities in all seasons.”
The Well will also have the 70,000 sq. ft. Wellington Market on its lower level, Toronto’s newest go-to location for market fresh and artisan food and culinary exploration. “It will be a new centre of gravity for this area,” says Edmison.
Over on Ossington Ave., Hullmark has restored a row of five European-inspired boutique shops, each of them under 1,500 sq. ft. CBRE’s Urban Retail Team have leased four of them, all during COVID.
Most are Canadian brands: Melanie Auld, a jeweler out of Vancouver; Fig, a beauty skincare company, also out of Vancouver; and Mandy’s Salads from Montreal. “A lot of cool Canadian retailers coming to this emerging scene in Toronto,” says CBRE’s Arlin Markowitz. “That’s what people want. They aren’t craving big U.S. chains; they want homegrown small neighbourhood boutiques they don’t have to drive to. And you’re seeing them pop up in places like Leslieville, Ossington and Parkdale.
The deals reflect what Markowitz has been seeing lots of in COVID’s wake, with tenants now able to operate out of smaller spaces thanks to better online sales and distribution channels. “Smaller shops don’t mean less business, they’re doing the same numbers,” he says.
"People want homegrown small neighbourhood boutiques they don’t have to drive to. And you’re seeing them pop up in places like Leslieville, Ossington and Parkdale."
No more discounts
With retail leasing having picked up in recent months, retailers seeking space and looking for special deals may well have missed their window of opportunity, Markowitz says. “There was a moment six months ago where retailers were able to step into the market and get favourable terms they never would have gotten before COVID.”
But landlords now see an end in sight with COVID. “So retailers coming in looking for bargains, more and more I’m finding the landlords are saying no.”
Markowitz has been seeing hybrid deals where for the first year of the lease the tenant only pays the landlord a percentage of sales, to reflect the short-term uncertainty of the business climate as we recover from COVID. “Tenants love it because if they don’t do well, they don’t pay rent. If they do well, then they’re happy to pay. We’ll see if this is the norm two years from now.”
Landlords have also been helping out tenants whose concepts they want to have in their locations, contributing significantly to the cost of building out the stores.
“A cool restaurant, fashion or fitness brand is saying, ‘Hey landlord, it’s going to cost me $2 million to build out the store, would you consider covering half the costs in order for me to come in and pay you lots of rent?’ And the landlord is saying, ‘Yeah we’ll do it’—more than before COVID,” Markowtiz says. “It’s good to see this dialogue and equilibrium in the market.”