Liquidation Underway, But No Need For Meltdown Over Nordstrom’s Departure

March 30, 2023 4 Minute Read

Nordstrom store closing

Nordstrom’s liquidation sale has started, but concerns about a retail meltdown in Canada can be put to rest.

The closure of all 13 Nordstrom stores in Canada has left market watchers wondering about the future of brick-and-mortar retail. While the U.S.-based retailer pointed to e-commerce as a factor in its demise, Nordstrom’s story echoes that of many other department store chains over the years.

“Every time a retailer disappears, we reflexively chalk it up to online shopping,” CBRE Canada Chairman Paul Morassutti said during his Canadian Market Outlook keynote in February. “A huge number of retailers have failed because they were bought by private equity and loaded up with debt. Many failed because they were simply poorly managed. Nothing to do with e-commerce.”

Retail has always been characterized by change, Morassutti reminded his audience; Nordstrom is simply the latest example.

Nordstrom closing

A history of churn

For decades Canadian malls followed a similar pattern, anchored by the same large department stores offering similar merchandise in similar formats across the country.

“Malls in this country were always highly commoditized; they looked the same, they had the same tenant base and virtually all were anchored by Eatons and Simpsons, two iconic, multigenerational retailers,” Morassutti said.

But mismanagement and failure to keep up with changing economic and retail landscapes led both retailers to file for bankruptcy in the 90’s.

In 2013, Canadian discount store Zellers followed a similar pattern when it closed its locations after 82 years of operations. The same year, Target opened 133 stores across Canada, in many cases taking over Zellers leases. The company retreated to the U.S. within two years of its launch, after losing nearly $1 billion in its first year due to poor logistical planning. Target left 15 million sq. ft. of retail space behind.

“As much as it's sad to see Nordstrom leave, it gives us an opportunity to do things that haven't been done before.”

Shortly after that, Sears went under, leaving yet another 15 million sq. ft. of retail up for grabs.

And now, returning like inflation after a long hiatus, Zellers is back, with 12 stores opening in March inside Hudson’s Bay stores in Ontario and Alberta.

“Retail has always been a very Darwinian asset class,” said Morassutti.

What’s next?

Many have speculated on what will become of the millions of square feet Nordstrom is in the process of vacating.

"As much as it's sad to see Nordstrom leave, it gives us an opportunity to do things that haven't been done before," CBRE’s Kate Camenzuli told The Canadian Press, adding she believes the premier properties left behind by Nordstrom will garner international attention. “These are institutional-grade, phenomenal pieces of real estate,” she told The Toronto Star.

Camenzuli expects whatever takes over the Nordstrom spaces to remain consumer-facing, pointing to entertainment or restaurants as potential options. She also predicts a new focus on experiences, which has become a critical part of the retail ecosystem.

With new CBRE data indicating that 7 out of 10 consumers prefer in-store shopping and that Gen Zers are more likely to shop in-person than Millennials, it’s never been more important for retailers to find innovative ways to capture the attention and dollars of consumers.

“After a decade of evolution, retail is in generally good shape especially given the ravages that Covid threw at it,” says Morassutti. “Investment activity has been fairly strong. Retail sales are up. Rents are up. Pure digital brands are moving into physical space and new retail concepts are emerging. Global sentiment is quite strong.”

“So much for the death of retail.”

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