News

Canada: Open for Business

BY Connie Robbins Gentry

From Target Corp. and Big Lots to J. Crew and Express, the list of U.S. retailers expanding into Canada or scouting locations north of the border seems to grow longer every day. With its growing population, enthusiasm for U.S. brands, relatively underserved market and stable, resilient economy, Canada has become a land of opportunity— and a potentially important profit center — for American retailers. In fact, more U.S. retail powerhouses are eyeing Canada as an untapped market to expand their customer base than ever before, according to a 2011 report from the Ryerson University Centre for the Study of Commercial Activity.

Some recent statistics help explain Canada’s appeal. After the global recession, the Canadian job market is rebounding (unemployment fell to 7.2% in March 2012). The country’s total population is more than 34.6 million, up 5.9% since 2006 (the fastest growth of any country in the G8).

Total Canadian retail spending in 2011 exceeded $450 billion, with the highest volumes in the provinces of Ontario ($160 billion), Quebec ($101 billion), Alberta ($64 billion) and British Columbia ($59 billion).

“U.S. retailers should absolutely look to Canada for expansion,” said James Smerdon, director, retail consulting, Colliers International Consulting, Vancouver, British Columbia.

Just as in the United States, one of the key metrics used to gauge retail success in Canada is average sales per square foot. According to the International Council of Shopping Centers, Canadian shopping malls overall outshine U.S. rivals, with average sales of $589 per square foot in 2011, compared with the American average of $412 per square foot.

“A snapshot from November 2011 showed the average sales per square foot at $610 at centers in Canada, compared with $417 sales per square foot at U.S. shopping centers,” said David Bell, senior associate, planning and retail consulting, Colliers International Consulting.

He noted that at Chinook Centre, the premier mall in Calgary, sales hit an average of $1,000 per square foot for the first time last November.

“Retailers should study shopping patterns across major cities and benchmark properties that are leaders in their respective markets,” Bell advised.

In another plus for U.S. retailers, there is no longer a pronounced difference in the value of the U.S. and Canadian currencies. Indeed, the value of the Canadian dollar has increased to be almost on par with the U.S. dollar.

According to the Bloomberg Correlation-Weighted Indexes, Canada’s currency — nicknamed the loonie — was up 3.9% over the six-month period leading up to April, while the U.S. dollar declined 2.4% during that same period. Essentially the two currencies were at virtual parity in early April, when the loonie was valued at 99.11 cents against a U.S. dollar value of $1.0090.

“When the currencies have comparable value and Canadian retail centers are performing that much higher than U.S. shopping centers, the Canadian retail sector looks a lot more attractive to U.S. retailers,” Smerdon said.

A major factor contributing to the higher performance of centers north of the border is that Canada has fewer shopping malls than the United States on a per-capita basis.

“When retailers begin the process of identifying opportunities in Canadian cities, it is very different than in American cities because we don’t have as much space — retail development has been more constrained here,” Smerdon said.

Challenges: Before they start pitching their tents, however, retailers should do their homework. Despite the many cultural similarities, Canada offers some unique challenges.

“The difference between great success and mediocre success in Canada depends on the retailer’s understanding that Canada is a patchwork of very diverse markets,” Smerdon said.

Canada is a network of regional economies and regional markets, Smerdon explained, and each has to be understood on its own merits.

“Rather than looking at Canadian averages for retail across the entire country, one must study the significant differences in economic characteristics from region to region, province to province, city to city,” he added.

Also, as noted earlier, retail space is somewhat limited. Historically, the development of shopping malls has not been as easy in Canada as in the United States due to a number of factors, including stricter zoning regulations and more limited financing options. Compared with the saturated U.S. market, the Canadian market is relatively underserved and ripe with untapped potential. Even during the recession, Canada’s retail real estate occupancy remained resilient, carrying above 97%.

But less mall space and more productive square footage also had a downside: higher rents versus the United States. And with demand for space in Canada’s existing centers, particularly the premium ones, skyrocketing, the situation is not likely to ease up anytime soon. Labor, material and distribution costs are also higher in Canada.

Real estate realities: According to many industry experts, mergers and acquisition represent the fastest, surest means of accessing retail real estate in Canada, and this is true for developers as well as retailers. Both Target Corp. and Big Lots have chosen this route.

In November, Tanger Factory Outlet Centers (Greensboro, N.C.) and RioCan Real Estate Investment Trust (Toronto, Ontario) announced they had jointly purchased Cookstown Outlet Mall, a 161,000-sq.-ft. center with the potential to be expanded to 320,000 sq. ft., located on the outskirts of Toronto. Tanger’s CEO Steven Tanger described the acquisition as the first step in establishing a larger Canadian outlet center portfolio.

Another U.S.-based REIT with one of the largest Canadian portfolios is Kimco Realty (New Hyde Park, N.Y.), which has 65 shopping centers throughout Canada, totaling 12.2 million sq. ft. Kelly Smith, managing director of Kimco’s Toronto-based Canadian operations, acknowledged the majority of Kimco’s Canadian properties were acquired and all of the centers are jointly owned with partners, although Kimco retains at least 50% interest in each one.

Describing development in Canada, Smith explained, “You don’t build unless you have tenants — that’s just the way it is here. We do very little in the way of development in Canada, but we do have the potential to increase the size of one of our centers that is currently 700,000 sq. ft. by up to 300,000 sq. ft. Apart from that, we might add a pad here or there, but that’s all.”

The supply of retail real estate is held in check by the banking system and lenders that are largely unwilling to finance speculative development. The constrained market is frustrating for retailers that want to expand, but it contributes to low vacancy rates and healthy competition when spaces do come available.

“There is less concern that a new shopping center will open down the road,” Smith said. “Our entitlement process is more difficult, expensive and time-consuming, which makes it harder to develop — but all these factors point to a low-risk environment with good economic fundamentals.”

When retailers do find a space, the leasing process is similar to that in the United States — but with a few notable exceptions.

“Negotiating power is tilted to the landlord in Canada, so co-tenancy clauses are rare and tenants have [less influence] over restrictions on other uses in a center or what other tenants can do,” Smith explained.

Retailers signing leases in Canada may be moderately surprised by how little leverage they have with institutional owners in Canada compared with the negotiating power they typically enjoy with U.S. landlords. But U.S. retailers are even more surprised by one of the subtle legal differences in Canada.

Mario Paura, senior partner at business law firm Stikeman Elliott in Toronto, explained: “Retailers can expect to operate under two binding agreements on the leasing side. In the United States, you typically have a non-binding agreement (letter of intent) followed by the binding lease. But in Canada, the offer to lease is binding and then [the parties] move into the binding lease.”

When retailers choose to purchase a property, rather than lease, they may encounter more delays and transaction fees than anticipated. Paura noted: “On the purchasing side, transactions may attract a land-transfer tax which, depending on the municipality, ranges from 1.5% to 3% of the transaction value.”

“With regards to permitting and entitlement,” Paura continued, “while there are many similarities between the U.S. and Canada, if questions are raised about the retail use — either by a city or residents or surrounding tenants — then the entitlement process may take longer.”

Additionally, there are unique property laws in the province of Quebec, largely because Quebec’s property laws are civil-code-based as opposed to common-law-based. Paura likened the fact that Quebec is uniquely different from Canada’s other provinces to the way Louisiana is different from other states, but he stressed that retailers should not feel intimidated by the differences.

“From a legal perspective, there are no material differences in regions that would make expanding into one region more difficult or easier than another,” stated Rocco Delfino, another senior partner at Stikeman Elliott. “In some cases, U.S. clients have the initial impression that Quebec, with its Civil Code and French language laws, may be more complex than common-law provinces. However, in conjunction with our Montreal office, we can readily explain the rules and requirements and provide related practical advice [so] clients are better able to focus on what makes sense from a business perspective.”

Geographical challenge: The most inflexible challenge facing retailers interested in expanding in Canada is the country’s geography and the inherent logistics required to effectively distribute goods for coast-to-coast operations.

Eighty percent of Canada’s more than 34 million residents live within 100 miles of the U.S. border. Across this relatively thin continental stretch of populated land, travel distances between major metropolitan areas are much greater than in the United States.

“Toronto, Canada’s largest city, is a five-hour drive from Montreal, the second-largest city,” Kimco’s Smith said. “And the third-largest city, Vancouver, is over a five-hour flight from Toronto — so distribution is quite a challenge if retailers want to open just a few locations in the largest cities.”

Smith has a list of U.S. retail concepts that Canadian consumers are clamoring for, and it includes Trader Joe’s (which has moved to the top of the wish list now that Target has made its commitment), DSW, Ross Stores and any of a number of higher-end restaurants. Perhaps the first step toward luring these brands is to build it, so they can come.

Not only is development in Canada considerably more constrained than in the United States, there is also little variety in the properties that exist.

“While the quality of our shopping centers is high, the range of shopping center formats is more limited in Canada, which to a degree limits consumer choice,” concluded Collier’s Bell. “Since consumer shopping preferences are very similar in both the U.S. and Canada, there are opportunities to bring a broad array of retail formats that are popular throughout the U.S., such as premium outlets, lifestyle centers and integrated mixed-use developments with entertainment, food and employment uses.”

In fact, that is already starting to happen. Indianapolis-based Simon Property Group and Calloway Real Estate Investment Trust, Toronto, have started construction on what is billed as Canada’s first upscale outlet center. The first phase of the planned 500,000-sq.-ft. Toronto Premium Outlets, a joint venture between Calloway and Simon, will open in the summer of 2013.

“We see tremendous opportunity to introduce our top merchants to the Canadian market,” said John R. Klein, president of Simon’s Premium Outlets division.

keyboard_arrow_downCOMMENTS

Leave a Reply

J.Lawrence says:
Apr-17-2013 11:15 am

Inspections are naturally not
Inspections are naturally not serious; rather, inspection is essential at all stage in civilization to make sure that most order are required as quite and professionally as likely, thus ensure security and protection for everyone. http://asiatextileinspections.com/

J.Lawrence says:
Apr-17-2013 11:15 am

Inspections are naturally not serious; rather, inspection is essential at all stage in civilization to make sure that most order are required as quite and professionally as likely, thus ensure security and protection for everyone. http://asiatextileinspections.com/

S.Ali says:
Mar-14-2013 06:59 am

majid
View our range of Plastic Cards, see Special Offers, get an Instant Quote, order free Sample Packs.Plastic cards Chartered Accountants London, Contractor Solutions, Accounting Services London, Management Accountants Londonaccountants london For the best money rates, come to Interchange FX, respected provider of foreign currency exchange services.foreign exchange

S.Ali says:
Mar-14-2013 06:58 am

saif
We produce quality printed PVC Banners, Textile Banners, Feather Flags and Sail Banners. banners Let Baydonhill FX help with your Currency or Overseas Money Transfers. www.baydonhillfx.com

S.Ali says:
Mar-14-2013 06:59 am

View our range of Plastic Cards, see Special Offers, get an Instant Quote, order free Sample Packs.Plastic cards Chartered Accountants London, Contractor Solutions, Accounting Services London, Management Accountants Londonaccountants london For the best money rates, come to Interchange FX, respected provider of foreign currency exchange services.foreign exchange

S.Ali says:
Mar-14-2013 06:58 am

We produce quality printed PVC Banners, Textile Banners, Feather Flags and Sail Banners. banners Let Baydonhill FX help with your Currency or Overseas Money Transfers. www.baydonhillfx.com

V.Brontoze says:
Feb-13-2013 04:09 am

Business is one of the
Business is one of the drivers of a country. There are many types of businesses that exist in a country in the world. You just choose the type of business and what areas will be undertaken. James Bond Themed Event

V.Brontoze says:
Feb-13-2013 04:09 am

Business is one of the drivers of a country. There are many types of businesses that exist in a country in the world. You just choose the type of business and what areas will be undertaken. James Bond Themed Event

A.Edden says:
Feb-12-2013 01:14 pm

If the business is in a
If the business is in a stopped state then there will be a lot of chaos going on. The main thing is the number of unemployed who were there. free advertising

A.Edden says:
Feb-12-2013 01:14 pm

If the business is in a stopped state then there will be a lot of chaos going on. The main thing is the number of unemployed who were there. free advertising

K.Mario says:
Feb-08-2013 07:39 am

There will be many
There will be many competitors in everywhere. So you should keep thinking for a new concept in everytime. schools for cna

K.Mario says:
Feb-08-2013 07:39 am

There will be many competitors in everywhere. So you should keep thinking for a new concept in everytime. schools for cna

T.Stone says:
Jan-29-2013 07:40 am

Randhurst Village mixed-use
Randhurst Village mixed-use project near Chicago. In order for the retailers to thrive alongside the office and entertainment players, a developer must balance the uses and consider the varying parking needs. http://www.superiorhomesolutions.net/home-inspection.html

T.Stone says:
Jan-29-2013 07:40 am

Randhurst Village mixed-use project near Chicago. In order for the retailers to thrive alongside the office and entertainment players, a developer must balance the uses and consider the varying parking needs. http://www.superiorhomesolutions.net/home-inspection.html

L.Kotasi says:
Jan-23-2013 10:35 am

Countries that have a lot of
Countries that have a lot of things that can be sold is one of the things that can cause there are many businesses that can be done. You can also participate with this. HPC

L.Kotasi says:
Jan-23-2013 10:35 am

Countries that have a lot of things that can be sold is one of the things that can cause there are many businesses that can be done. You can also participate with this. HPC

T.Stone says:
Jan-04-2013 08:44 am

I am searching for a good
I am searching for a good concepts on recession and I think this is the best blog for me to expand ithandyman roseville ca

T.Stone says:
Jan-04-2013 08:44 am

I am searching for a good concepts on recession and I think this is the best blog for me to expand ithandyman roseville ca

J.Hams says:
Dec-25-2012 06:54 am

http://www.amerisleep.com
I have a memory foam mattress and love it. I don't think its very hot, but then again my house is really cold even in the hot summers. The first night I didn't really like it but now I really, really love it. I have had it for about a year. One thing you might not know is that when they are advertised, it may say something like temperature controlled. Ect. That just means that the spot you have been laying in gets really soft and comfy. The rest of the mattress will feet a lot harder and harder to the touch. Hope that helped and made sense!!! http://www.amerisleep.com

J.Hams says:
Dec-25-2012 06:54 am

I have a memory foam mattress and love it. I don't think its very hot, but then again my house is really cold even in the hot summers. The first night I didn't really like it but now I really, really love it. I have had it for about a year. One thing you might not know is that when they are advertised, it may say something like temperature controlled. Ect. That just means that the spot you have been laying in gets really soft and comfy. The rest of the mattress will feet a lot harder and harder to the touch. Hope that helped and made sense!!! http://www.amerisleep.com

T.Stone says:
Dec-04-2012 02:20 pm

free advertising online for my business
“We see tremendous opportunity to introduce our top merchants to the Canadian market,” said John R. Klein, president of Simon’s Premium Outlets division. free advertising online for my business

T.Stone says:
Dec-04-2012 02:20 pm

“We see tremendous opportunity to introduce our top merchants to the Canadian market,” said John R. Klein, president of Simon’s Premium Outlets division. free advertising online for my business

Polls

Consumer confidence is high. Is that reflected in your stores’ revenues?

View Results

Loading ... Loading ...
News

Retailers in Growth Mode

BY Marianne Wilson

There’s no doubt that Canada is very much on the minds of U.S. retailers these days. As our cover story points out, Canada is attractive for a number of reasons, from its growing population to its resilient economy. But there is plenty of expansion going on here at home too. The extent of the activity is detailed in the “Spring 2012 Retailer and Restaurant Expansion Guide” from ChainLinks Retail Advisors. The comprehensive report, which details the current expansion plans for more than 2,500 U.S. retail and restaurant chains, finds retailer demand is up approximately 5% over last year’s levels.

“Demand is being driven by discounters, grocery store chains, off-price apparel retailers, fast food and fast-casual dining concepts,” said Garrick Brown, national retail research director, ChainLinks.

Retailers cited in the report include Subway, which is planning up to 2,500 stores worldwide in 2012, and Dollar General, on track to open 650 stores. Other retailers include Family Dollar (500), 7-Eleven (at least 300) and Dollar Tree (300).

Additional chains that are expanding in 2012: Chipotle Mexican Grill expects to open 155 to 165 locations — its most ever in one year. Big Lots is also in a growth mode and anticipates opening 90 U.S. stores. Vitamin Shoppe plans to open some 50 stores. Bed Bath & Beyond has 40 stores in the works across its banners.

In the off-price segment, Ross Stores continues to expand at a fast clip, both its namesake brand and its dd’s Discounts format. Ross still has plenty of room for expansion.

In sporting goods, Dick’s Sporting Goods expects to open 40 locations for 2012. Hibbett Sporting Goods, which has flown under the radar for years, will add 55 to 60 stores in 2012.

Outdoor gear retailer Cabela’s will debut a smaller-sized concept, Cabela’s Outpost, this fall, in Union Gap, Wash. Gander Mountain Co. also has a smaller-sized prototype in the works.

Notably missing from the list so far are specialty apparel retailers. There is no getting round the fact that some of the largest apparel chains, from Gap Inc. to Abercrombie & Fitch, are closing more U.S. locations than they are opening new ones. But the sector has by no means grown dark. Specialty apparel remains a vibrant category, with newer players and spin-off concepts injecting fresh blood. Here is a sampling:

• Francesca’s Holdings: The fast-growing accessories and apparel brand will open 75 stores this year.

• Charming Charlie: The accessories brand has wasted no time in ramping up, with 60 locations on tap for its current fiscal year.

• Madewell: The casual young women’s apparel brand from J. Crew is ready for rollout. It will open about 15 locations this year, with a bigger ramp-up in 2013.

• Athleta: Gap has identified its women’s activewear brand Athleta as a primary growth vehicle for the United States, with plans to have 50 stores open by the end of 2013.

• C. Wonder: Launched in New York City last fall, this women’s apparel and lifestyle start-up has since opened in three mall locations, with several additional stores set to open. Owner Chris Burch plans to grow C. Wonder to more than 100 stores nationally.

As I said, there is plenty of activity in U.S. retail these days.

[email protected]

keyboard_arrow_downCOMMENTS

Leave a Reply

B.Brent says:
Nov-30-2012 03:26 pm

Resilient economy with a
Resilient economy with a budding population are two important factors in expansion. As a matter of fact, this is the "magnet" for businesses. - Garrett Hoelscher

B.Brent says:
Nov-30-2012 03:26 pm

Resilient economy with a budding population are two important factors in expansion. As a matter of fact, this is the "magnet" for businesses. - Garrett Hoelscher

Polls

Consumer confidence is high. Is that reflected in your stores’ revenues?

View Results

Loading ... Loading ...
News

Neiman Marcus gets new information chief

BY CSA STAFF

DALLAS — Neiman Marcus has named Michael Kingston SVP, CIO of The Neiman Marcus Group. He succeeds Phillip Maxwell, who earlier this month announced his retirement.

Kingston joins The Neiman Marcus Group from Ann Inc., parent company of Ann Taylor, where he was the EVP enterprise transformation and technology. Prior to Ann Inc., Kingston was VP applications at Coach Inc. and international director information services at LVMH.

"Michael Kingston is the perfect choice for us to lead our Information Technology team, " said Karen Katz president and CEO of Neiman Marcus Inc. "The use of new technology and integrated systems is key to our omni-channel strategies. Michael’s background in the retail industry, combined with his impressive skills planning, designing, implementing, and supporting applications for large multi-national corporations will blend perfectly with our very talented management team."

keyboard_arrow_downCOMMENTS

Leave a Reply

No comments found

Polls

Consumer confidence is high. Is that reflected in your stores’ revenues?

View Results

Loading ... Loading ...