They were thought to be dying, left bloodless by the popularity of online commerce. But the shopping centers have not said their last word.
According to a recent study by the rating agency DBRS Morningstar, sales and rents are definitely on the rise, as is the occupancy rate. This is the case for quality regional centers like Carrefour Laval and Fairview Pointe-Claire.
” The morale is good. The shopping center people I speak to are happy,” testifies commercial real estate specialist Jean-François Grenier, senior director at Altus. His comments corroborate the main observations of DBRS. “The customers came back. Sales went up. Ridership remains lower. Visiting time has decreased. But people go there, they buy and they leave. In general, the value losses for regional shopping centers are behind us. »
On the other hand, shopping malls in city centers still suffer from the part-time presence of workers in office towers, recognizes Mr. Grenier. The DBRS study says nothing about large stores whose challenges have been documented in the past.
The occupancy rate of the top 10 best-selling malls stood at 92% at the end of 2022. The absence of new premises in the market and the expanding roster of retailers bodes well for the future.
Aisle 24, a grocer without a cash register, Canada Goose, Decathlon, Dollarama, Goodwill, an American non-profit thrift store, IKEA with its planning centers or studios, the Montreal salad counter specialist Mandy’s, Nespresso, Noodlebox, Sephora, Simons, the Asian food chain T
As they have little choice where to settle, they create upward pressure on rents in existing centers. They also reached a peak in most enclosed shopping centers in Canada, in the second quarter of 2023, according to the Colliers agency report on retail properties.
Growing strongly since 2021, traffic has certainly not returned to pre-pandemic levels – 3.1 billion visitors to Canadian centers in 2022 compared to 4.2 billion in 2019. But sales are there.
“The sales conversion rate (the number of visitors translating into sales) has increased by 12% (inflation adjusted) since 2019, indicating that consumers are shopping with more intention and spending more per visit,” writes DBRS.
In fact, sales per customer are lower than before the pandemic, but total sales are stronger. The vigorous growth of the Canadian population is blowing at the backs of retailers.
On the stock market, shopping center stocks are depressed. Investors fear the pangs of the coming recession. Shares of RioCan (REI.UN), First Capital (FCR.UN) and Primaris (PMZ.UN), for example, are selling at deep discounts to their historical valuations. The annual return on their distributions is between 6 and 7% per year.
“Their concerns are overblown,” says VMD analyst Lorne Kalmar, “especially considering the performance of shopping center REITs during recent recessions and the current state of retail sales fundamentals. »
Other martyrs of the pandemic who are improving, hotel establishments show an increase of more than 20% in their revenue per room in the 3rd quarter of 2023, compared to the same quarter in 2022, according to a recent report from the real estate agency Cushman
Revenue growth was 29% in Montreal in the last quarter, the third highest performance in the country. Hotels in Quebec City, for their part, experienced a 24% increase in revenue.
How can we explain this strong comeback of the hotel sector, which was damaged during the pandemic? The base effect plays a role, since in the first quarter of 2022, health restrictions were still in place in some markets.
At the Canadian level, the average revenue per room is $137.43 and is up 21% from the pre-pandemic figure. These are current dollars. In fact, income growth follows the trend of inflation.
The increase in the cost of living also contributes to the increase in operating costs, particularly labor.
Margins are under pressure, several sector managers indicated during the Women in Hospitality conference which was held in Toronto at the end of October, reports Cushman Wakefield in its report.
For next year, the industry expects much more moderate growth of around 5% in revenue per room, due to the deteriorating economic outlook. Hotel chains operating in city centers are crossing their fingers that demand from the business community and foreign demand returns to 2019 levels, which is not yet the case. The absence of new addresses and the restrictions surrounding the rental of short-term tourist accommodation could give them a boost.