Neighbourhood malls are quickly becoming a memory, and companies like Amazon are to blame. Consumers are embracing the simplicity and convenience of online shopping. From smaller local malls such as Whitby Mall, to sprawling malls like Thornhill’s Promenade, building owners are seeing a decline in lease renewals in the GTA.
“I think what we’re going to see is less malls, and more experience stores,” said Andrew Fortis, who leads Hummingbird LLP’s real estate and corporate/commercial practices, “I think that there are still people who enjoy the retail experience.”
Fortis mentioned that smaller store owners are having difficulty competing with the instant gratification of online shopping and the hands-on appeal of experience stores.
Experience stores, like Apple, that let you play around with new products and explore features have become the staple retail space in most successful malls. Reported in Forbes, stores that share a mall with an Apple Store will see a 10% increase in sales over the same stores that do not share a mall with an Apple Store.
The idea of the traditional neighbourhood mall is becoming a thing of the past. Leases are not being signed for as long as they used to be, and the current leases reflect something similar to a trial basis.
“Before, if you were a store owner, you would sign a 10-year lease because you wanted permanency. Now it’s, ‘No, no, no, I only want two, three years, I don’t want to be tied down. I want to see how it goes. If it works, great, I’ll renew. If not, I’m going to leave.’ That leaves uncertainty for a landlord.
“Even if the landlord is in a cash position, they’ve got to get financing. They have to make sure they have cash flow from these tenants who pay. Nobody wants to sit there with a vacant property. So, if retailers are only snapping up two or three-year leases; it’s hard,” Fortis said.
Although smaller malls may be shutting down, developers have come forward with an efficient solution. Developers are taking these properties and looking to fit larger retail spaces comfortably into mix-use development.
“The other thing we are seeing a lot of is a good use of space when these condominium towers go up, they used to be fully residential. Now the first floor or even the first couple floors are commercial,” Fortis said.
Toronto’s Aura at College Park stands above the rest as a prime example of mix-use development in the city. Towering at 78 stories of residential space, with nearly 1000 suite units and a 40,000 square-foot fitness facility. It also stands on top of a Marshall’s and Bed, Bath & Beyond.
Fortis, a Certified Specialist Real Estate Lawyer, said that it only made sense to develop for mix-use, as it maximizes use of the land. “You have people on top of you who are going to be shopping, and it’s a good way of reducing the common element expenses for a building by renting it out for retail as well.”
“The City of Toronto and the GTA are looking to prioritize density,” Fortis noted. And the way to do that is through mix-use development. Especially as less residential plots become available.
Developers can look to capitalize on this land to provide more residential places. However, while this conversion is an idea thriving on efficiency, it can come to be a lengthy process.
“Because you’re converting it from commercial retail space to residential. Something like that can take four or five years depending on what your plans are, and how grand they are. Every property is subject to zoning by-laws that are set out by the official plans, set out by the province and come out every 10 years,” Fortis said.
While it is unfortunate that internet outlet giants, like Amazon, are taking over the retail experience, that doesn’t mean that it will be completely erased. Instead, the idea of having countless malls in North America will be drastically changed. To change this, savvy developers and investors have come up with a solution to counter this decline. A swift plan for a multi-use property, combining retail and residential land to optimize land use, create a denser retail space and ensure financial security for investors.