Canada's Top Malls Becoming Live, Work Play Communities

Development will focus on repositioning existing assets in Canada’s retail sector this year, while mounting economic pressures will see consumer spending habits change as retailers leverage the value of their physical stores, according to CBRE’s 2023 Retail Outlook.

The latest wave of retail development in Canada aims—as it is in the United States—to transform malls into communities that cater to all facets of live-work-play.

Major projects have been announced that will add density to existing properties through residential towers, as well as infill projects to unlock value in underutilized parking or surrounding surface lots.

“Malls across Canada have undergone various waves of development and redevelopment and are gearing up to evolve once again,” CBRE said.

This is especially true in prime trade areas, transforming sites into transit-oriented. master-planned centers that offer the live, work, play environment.

Of the 30 top-performing regional shopping malls in Canada, over half have announced plans or are currently undergoing massive redevelopment efforts that will add thousands of residential units to the immediate site, CBRE reported.

Today, the average age of regional- and super-regional shopping malls in Canada is approximately 50 years, with nearly 80% of centers built in 1980 or earlier.

The new projects are multi-phased and will see centers transform with initial stages of development due over the next year and beyond. This trend is not exclusive to premier sites, however, which continue to remain in demand, CBRE said.

Second– and third -tier assets, meanwhile, are facing significant headwinds, the report said. It is likely there will be more infill development of this nature announced in the year ahead, especially among these lower-performing assets which have become increasingly expensive to operate, according to CBRE.

Coming out of lockdown, pent-up demand led consumers to take part in what retailers are calling “revenge shopping.” Spending habits have started to cool and are anticipated to slow further in the year ahead, with Oxford Economics forecasting a 1.7% decline in retail trade.

Inflation and elevated interest rates have started to tighten spending and ultimately will lead to a more cautious consumer in 2023, CBRE said. The Canadian household savings rate has come off its peak and debt-to-disposable income levels are once again rising.