Commodities Boom Fuels Prairie Retail Surge in Saskatoon and Calgary
June 15, 2023 6 Minute Read
Like Calgary, Saskatoon is a town dependent on resources (agriculture, potash, uranium, oil) and prone to economic booms and busts.
And right now, things are booming.
Global population growth and the war in Ukraine have created extraordinary demand for Saskatchewan’s key commodities, including wheat, its staple crop, as well as uranium, with Ukraine Energy recently inking a supply contract with Saskatchewan-based Cameco.
Demand is also on the rise for potash, a key fertilizer in agriculture, which outside of Canada is primarily produced in Russia and Belarus.
All that commodity-driven activity means lots of people in Saskatoon have good-paying jobs and money to spend, and they’re looking for places to do it.
“Unfortunately, world events have been a boon for us here, and our agricultural and mining industries have had to step up the game with additional production,” says Kelley, a broker in CBRE’s Saskatoon office.
“And it’s having a seriously positive trickle-down impact on our retail market.”
Saskatchewan led Canada in real GDP growth last year, up 5.7% over the year before. Bullish companies are greenlighting capital projects across the province, leading to a surge in migration as firms seek workers for those projects.
“Immigration growth is strong, and wage growth is going through the roof, leading to more and more discretionary income for retail spending,” says Kelley. “And when the retail sales pick up, so does the commercial real estate activity as well as the number of retail jobs Saskatoon has to offer.”
Meadows Market Saskatoon
Caught off guard
Kelley admits the commodities boom and the swelling discretionary incomes that have come with it “caught us a little off guard.”
High street retail isn’t a big thing in Saskatchewan, save for small parts of Saskatoon. (A new arena planned for downtown Saskatoon is expected to spur the creation of an entertainment and shopping district downtown, like in Edmonton.)
But drive-to suburban grocery/pharmacy/liquor-anchored power centres are Saskatchewan’s bread and butter when it comes to retail sales. “We drive everywhere here,” Kelley says.
Problem is, there are just a handful of new power centre retail projects under development to serve what’s proving to be voracious demand for goods and services.
Dream is working on Brighton Marketplace, with 235,000 sq. ft. of retail space in Homewood, which it’s billed as the largest master-planned community in Saskatoon. But the project is nearly fully leased.
In Rosewood in southeast Saskatoon, Arbutus Properties is developing Meadows Market, the commercial anchor to one of the city’s fastest-growing neighbourhoods.
Kelley and his team are currently marketing phase 2 of the project, which has 180,000 sq. ft. of retail and is anchored by Costco (phase 1), Marshalls, Pet Smart, Dollar Tree, Co-op Liquor and Visions.
Meadows Market is more than 80% leased, Kelley says. “And once it’s all taken there will be fairly limited options for retailers seeking space in the city.”
“Putting a new project in play takes a long time, four years likely,” he adds, and construction pricing and rising interest rates have only compounded the challenge of getting new developments underway.
“We had a host of options that have been filled and now it’s down to only a couple of projects, and the pipeline after those is pretty much empty.”
For retailers eyeing a long game, however, Saskatoon promises to be in a strong economic position for the foreseeable future, and that means increasingly fatter discretionary incomes for the tapping.
“Developers are gearing up to figure out what comes next,” says Kelley. “They know they need to respond to this unprecedented demand for retail, so the next few years will be critical.”
Calgary’s Booming Too
Like its sister city, Calgary is also experiencing a retail surge thanks to a strengthening economy.
John Moss, CBRE’s point person for Calgary retail, says 2022 was his team’s best leasing year ever.
He credits a diversifying economy, which is gradually shifting from its oil and gas dependence and expanding to include industries like tech, renewable energy, alternative mining (lithium), cannabis production, and agricultural carbon capture.
Moss also attributes Calgary’s retail momentum to the rapid influx of B.C. and Ontario residents moving there because they’re sick of the exorbitant cost of living in those provinces. “They looked at their lifestyle and said I can move to Alberta and double the amount of house for the same money,” Moss says.
“That significant increase of residential migration to Calgary is now supporting retail. Residential growth leads to retail expansion.”
Gateway Development in Calgary
Retail Momentum Despite Challenges
Like elsewhere, soaring construction costs and interest rates have led to what Moss calls a “substantial reduction in retail construction” in Calgary.
“It has stalled new development and put pressure on retail rental rates and vacancy in existing properties, which has in turn intensified retail transactions.”
New projects are under way in spite of the challenges.
On the west side of Calgary, Moss and his team are set to launch a new retail project at Truman Development’s West District. Dubbed Gateway, the mixed-use development will include a high street with 170,000 sq. ft. of retail, including a 40,000 sq. ft. grocery store.
Gateway is the first stage of a multi-phase 95-acre mixed-use community that will ultimately comprise 3,500 residential units, 500,000 sq. ft. of retail and 1.2 million sq. ft. of office.
Moss’s team has also been hard at work filling the retail space at The District at Beltline, a project by San Francisco-based Spear Street Capital that saw the ground floor spaces of a former IBM campus revamped to create a retail-focused gathering spot.
“We launched an entertainment and food and beverage hub that has just taken off,” says Moss, noting that every deal there got done during COVID.
“It could not have happened without the landlord believing in the vision and the tenants believing in the merchandising.”
“The trend right now is about amenitizing communities, and landlords are embracing this,” Moss adds. “They’re looking to bring urban cool or trendier tenants out to suburban nodes.
“With COVID people started to stay in their own backyards, and they were less likely to drive places. So the demand is more fickle now and they want quality downtown cool tenants to move to the suburbs.”
Arena Establishes the Node
Back downtown, the announcement of a new arena for Calgary has created big buzz and high hopes for the creation of something similar to Edmonton’s ICE District.
“The arena deal news establishes the node,” says Moss. “Everyone was speculating on where it would be located. And now that the location has been secured, the stakeholders surrounding it are being proactive to get a plan together and design their properties to support it.”
All of it bodes well for Calgary retail looking forward.
“With the diversification of our economy, and the massive influx of residential support from outside of the province, plus our reasonable cost of living, we should be able to weather most storms,” Moss says.
“And now with the arena plan taking shape, there is a lot of support that will prop this city up for the foreseeable future.”
There is renewed promise and prosperity in the Prairies. Only this time, retail is leading the way, with Saskatoon and Calgary at the centre of the action.
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