If you’ve noticed more vacant storefronts in Vancouver recently, you’re not alone.
A new report from real estate company Colliers says a combination of more people working from home, rising interest rates and inflation are contributing to a “recalibration” of the region’s retail rental market, with some businesses shifting operations to the suburbs.
The company has pegged the average urban retail vacancy rate at 4 per cent, up from 2.5 per cent in in its mid-year survey. Meanwhile, the average suburban retail vacancy rate has slid from 2.3 per cent mid-year to a razor-thin 1 per cent.
The numbers are even more stark when broken down into specific geographic areas, with some of Vancouver’s traditional “high streets” facing major headwinds.
Robson Street from Thurlow to Bute streets had the city’s highest retail vacancy rate, at 15.4 per cent, followed by Alberni Street from Thurlow to Burrard streets at 9.57 per cent, and Water Street in Gastown at 7.65 per cent.
Julio Saatchi, whose family has run Saatchi & Saatchi Fine Jewelry on Robson Street since 1989, said the area has faced problems since before the pandemic.
“This corner of Robson and Thrulow that I have been for 33 years, it was called the gold mine of Vancouver. It was the most popular street for Canada all together,” he said.
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Saatchi said when the family opened the business they were paying $30 per square foot in rent, but that the average on Robson is now in the ballpark of $230-$240.
“It becomes very difficult, to be honest with you, with the economy today, but there are times we want to pack it up but I have a very kind landlord, she’s extremely sweet to me,” he said.
Colliers senior managing director Madeleine Nicholls pegged much of the recent shift on the pandemic-driven shift to working from home, which has had effects on both the central business district and suburban communities.
“Even if people are coming back to the office three or four days a week, that still means they are spending three or four days closer to home, working from home and shopping from home, etc.,” she said.
“It’s really meant that some businesses that perhaps don’t want to pay the higher rent downtown can really make sense of it now moving to a suburban location where the rent is more affordable and their customers are there as well.”
Nicholls said there has been a surge in demand for restaurants, fashion retail and personal services in the suburbs.
And while there is plenty of development in the works for the region — 7.5 million square feet of new retail slated to come online in the next three to five years, much of it outside the city core — the majority is already pre-leased.
Even so, Nicholls remained bullish on the future of retail in Vancouver proper.
“Before we started on the very low vacancy rates, somewhere in the low six to 10 per cent range would have always been considered very healthy because that allows opportunities for growth and stores to right size and move down the block,” she said.
“The downtown is finite, its constrained land densely populated with residents, still the main place where people are working …. those will always be drivers in addition, of course, to transit.”
To that end, many dense neighbourhoods in Vancouver are still seeing low vacancy rates.
The report showed parts of Yaletown had a zero-per cent vacancy rate, while the Cambie Village sat at 1.2 per cent, the west end at 1.93 per cent and the Davie Village at 2.23 per cent.
And some entrepreneurs are eyeing parts of town that are moving in that direction.
Erin Ireland opened her bakery To Live For’s first retail location on Nanaimo Street north of First Avenue 10 weeks ago, and pointed to the many new development applications in the area.
“We have been super busy, especially on weekends, we have a lineup halfway down the block, and we’ve been very very grateful for the support of the community,” she said.
“I think it’s worth paying a little bit more to be in Vancouver, just because it’s so central — the density, it really helps business.”
Colliers is predicting one to two years of bumpiness in business openings and closings, but is projecting a positive long-term outlook for the retail sector.