E-Commerce, Future of Retail Real Estate and Blurred Lines

Tuesday Apr 28th, 2020




Most real estate experts agree the pace of e-commerce growth is going to accelerate rapidly during and after the Covid-19 era. This has significant repercussions for all kinds of Real Estate but the most affected will be the Retail Plazas and Shopping Malls. Although Canada has much less per capita Retail Square Footage than USA (15.9  VS 24) but even that seems too much at the start of this new era. No one can tell for sure what will be the right balance eventually. However, all the stakeholders of Canadian retail real estate need to act quickly and collaboratively. The most important role will be the proactiveness of Owners and City Officials. They are the ones who have most to lose. Vacant stores and Malls are going to hurt both with reduced rents, lower property values and hence lower property taxes. Many large retail real estate owners (Riocan, First Capital, Smart Centres etc.) have already been working on adding non-retail uses to their sites. Mixed use developments and Transit oriented developments have been the name of the game for a while now. However, the pace of change is going to amplify manifolds with Covid-19. All the stakeholders need to work together more than ever.

City Officials must understand the Official Plans that were meant for 15 yrs to 25 yrs may have become meaningless with the new realities of life. The Planning parameters that the Urban Planners used to come up with Official Plans and Zoning By-Laws may not be pragmatic anymore. For example, visit any school in a new neighbourhood in GTA and you will find portable classrooms in the playgrounds and even that is not enough for the number of students in that neighbourhood. One reason is that the Urban Planners haven’t been quick enough to realise and ascertain the no. of people per household and the no. of children per household in these neighbourhoods. The problem keeps on getting bigger and bigger with every new Subdivision.

Similarly, urban planners need to realise the needs of new retail or new industrial. The distinction between the two is getting blurred. Should we consider Amazon a Retailer or Distributor (which is considered industrial) or both. Same goes for Cost Co and Best Buy and Walmart and Canadian Tire. Amazon distribution centres are considered Industrial and Best Buy stores considered retail, so they have different parking requirements and different property tax rates. Do we need the same parking ratio on sites for these e-commerce players? Should they be charged the same property tax rate to give level playing fields? Should we update the commercial use classifications to give more optionality to retail sites? Should retail sites be allowed to have more Industrial Space and vice versa? The Cities, Owners and communities should be receptive to new ideas and work together to come out as winners. The Official Plan Amendments and Zoning Amendments should not take years in this age of technology and disruptions.

There are a number of discussions that need to happen. However, the important part is that these need to happen quick and actions must be even quicker.



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