Vancouver retail vacancy rates rising, suburban rates falling in ‘recalibration’: report

If you’ve noticed more empty storefronts in Vancouver lately, you’re not alone.

A new report by real estate firm 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 moving their operations to the suburbs.

The company has put the average vacancy rate in urban retail at 4 percent, up from 2.5 percent in its mid-year survey. Meanwhile, the average retail vacancy rate has fallen to a razor-thin 1 percent from 2.3 percent at mid-year.

The numbers are even more stark when broken down by specific geographic areas, with some of Vancouver’s traditional “high streets” facing severe headwinds.

Robson Street from Thurlow to Bute Streets had the city’s highest retail vacancy rate at 15.4 percent, followed by Alberni Street from Thurlow to Burrard Streets at 9.57 percent and Water Street in Gastown at 7.65 percent.

Julio Saatchi, whose family has run Saatchi & Saatchi Fine Jewelry on Robson Street since 1989, said the area was struggling even before the pandemic.

“This corner of Robson and Thrulow, where I’ve been for 33 years, has been called the Vancouver Gold Mine. It was the most popular road for Canada overall,” he said.

Saatchi said when the family opened the store, they paid $30 rent per square foot, but the average at Robson’s is now in the $230 to $240 range.

“To be honest with today’s economy it’s getting very difficult but sometimes we want to pack it up but I have a very nice landlady, she’s very nice to me,” he said.

Madeleine Nicholls, Colliers’ senior managing director, attributed much of the recent shift to the pandemic-driven work-from-home shift that has impacted both the central business district and suburban communities.

“Even if people come back to the office three or four days a week, it still means they spend three or four days closer to home, work from home and shop from home, etc.,” she said.

“It’s really true that some businesses that might not want to pay the higher rent downtown actually make sense to move to a suburb now, where the rent is cheaper and their customers are there, too.”

Nicholls said there has been a surge in demand for restaurants, fashion stores and personal services in the suburbs.

And while there’s a lot in the works for the region — 7.5 million square feet of new retail space is slated to come online in the next three to five years, much of it outside of the city’s core — the bulk is already pre-let.

Nonetheless, Nicholls remained optimistic about the future of retail in Vancouver.

“Before we started with the very low vacancy rates, somewhere in the low range of six to 10 percent would always have been considered very healthy because that allows for growth opportunities and right-sized stores and pulls the block further down,” she said .

“Downtown is finite, its limited land densely populated with residents, still the main place where people work…. Of course, these will always be transit drivers as well.”

To that end, many densely populated Vancouver neighborhoods still have low vacancy rates.

The report showed that parts of Yaletown had a zero percent vacancy rate, while Cambie Village was at 1.2 percent, the West End at 1.93 percent, and Davie Village at 2.23 percent.

And some entrepreneurs are eyeing neighborhoods moving in that direction.

Erin Ireland opened the first retail location of her bakery, To Live For, on Nanaimo Street north of First Avenue 10 weeks ago, noting the many new development proposals in the area.

“We’ve been very busy, especially on the weekends, we have a lineup halfway around the block, and we’ve been very, very grateful for the community support,” she said.

“I think it’s worth paying a little more to be in Vancouver just because it’s so central — the density, that really helps the business.”

Colliers is forecasting a year or two of bumpy store openings and closings, but projects a positive long-term outlook for the retail sector.

© 2023 Global News, a division of Corus Entertainment Inc.