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Photo illustration by Jason Chiu (Kevin Van Paassen/The Globe and Mail/Kevin Van Paassen/The Globe and Mail)
Photo illustration by Jason Chiu (Kevin Van Paassen/The Globe and Mail/Kevin Van Paassen/The Globe and Mail)

retail

The little big-box stores that could Add to ...

When Steven Alikakos was negotiating the lease for the basement space of 96 Spadina Ave., a few concessions were required on both sides.

The new tenant wanted access to a back-alley loading dock, where palettes of wrapping paper, plastic toys and seasonal decor could be dropped on a regular basis.

The landlord had a somewhat more delicate request.

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"They had to change their signage," said Mr. Alikakos, the senior vice-president of retail Canada for commercial real-estate player DTZ Barnicke. "A forty-foot Dollarama sign on the side of the building would have completely altered that historic brick-and-beam building."

With suburban growth slowed and city populations soaring, stores such as Wal-Mart, Loblaw and Target are changing their focus, modifying their big-box model to squeeze into the high-density Toronto core. And even if some urban shoppers cringe at the idea, swearing they will never forsake their neighbourhood bistros and boutiques for Milestones and HomeSense, the fact of the matter is that the success of these stores has already been written in receipts.

"The numbers are extremely compelling," said Ed Sonshine, chief executive officer of shopping-mall developer RioCan. "It costs a lot more to be in the city, but places like Winners have proven that it's well worth it."

The major hindrance to big-box expansion in Toronto has not been attracting customers, but actually finding space big enough to accommodate even miniature versions of stores known primarily for their scale.

"They're used to building a one-storey store that's 100,000 feet with another seven acres of parking," said Mr. Sonshine. "That just is impossible in the city. Even if you could find it, you could never afford it."

In the U.S., the urban big-box invasion has been abetted by the fact that many large cities were once home to a large number of department stores, whose expansive footprints can be easily taken over and modernized.

In Toronto, stores are settling for space in the 8,000-to-20,000-square-foot range, with the understanding that city shoppers won't necessarily buy as much, but they'll come back more often.

The new Dollarama on Spadina is 9,700 sq. ft. below sidewalk level, marked with three relatively demure signs. But even with its low-profile look, the store's midday lineups have demonstrated a surprising downtown demand for paper plates and party supplies.

Others are staking a claim to large-scale space that has not historically been associated with high-volume retail.

In December, Mr. Sonshine's company bought a site on Dupont Street that is currently home to high-end car dealer Grand Touring Automobiles. He sees Dupont, with its numerous warehouse-scale buildings, as a potential "power centre" for Toronto big-box retail.

Other brands have been similarly creative in their choices.

In 2009, Leon's moved into the Roundhouse and this summer, Crate & Barrel offshoot CB2 will open in the former Big Bop building at Queen and Bathurst, bringing young condo dwellers into a space that was once the sole domain of disaffected punks and underage drinkers.

Even the club district is being considered retail friendly, with the U.S. department store Marshalls reportedly eyeing the former location of Circa nightclub on John Street.

But because existing buildings can be hard to modify for a large-scale retailer, many brands are focusing instead on the opportunities of new build condominiums.

At Queen Street West and Portland, Mr. Sonshine's RioCan is building a development that will house a 45,000-sq.-ft. Loblaws, an 8,000-sq.-ft. Joe Fresh and a 29,000-sq.-ft. Winners outlet in the base of a condo tower.

And in the Aura condo being built at Yonge and Gerrard Streets, a 55,000-sq.-ft. Bed, Bath & Beyond will move in, along with a large-format Alice Fazooli's.

Tony Hernandez, director of the Centre for the Study of Commercial Activity at Ryerson University, said these retailers are desperate to follow the population growth, and this means thinking differently about the kind of stores they open, and where they go.

"They have to be a bit more inventive, and that's the challenge," he said.

Downtown iterations of supermarket chains Sobeys and Loblaws have been successful by selling a large amount of prepared food, while scaling back the diaper and baking aisles.

Other retailers have had to drastically rethink the layout of their stores in an urban market, and modify their delivery methods for locations where private loading docks are not always an option.

The new shopping centre at Queen and Portland was built with underground loading facilities, while some big-box stores are investing in fleets of smaller delivery trucks that can more easily navigate city streets.

The next phase of big-box growth in Toronto will be vertical, said Mr. Hernandez, with stores stacked on top of one another like brightly coloured Lego blocks.

"It's maximizing the use of the footprint," he said. "The challenge with that is consumers. Do you want to go up to the fourth floor to shop?"

Of course, not every downtown big box works. Canadian Tire, which has pioneered large-scale urban retail, has struggled with its location at Bay and Dundas Streets.

Neighbourhoods outside of the core are more challenging to infiltrate, with shoppers less likely to embrace a Joe Fresh at Queen and Logan than they would be at Queen and Bay.

Somewhat surprisingly, John Kiru, executive director of the Toronto Association of Business Improvement Areas said his members welcome brand names, which bring increased foot traffic and membership revenue to a shopping district.

"I think the knee-jerk reaction is, 'Oh my god, these guys are going to wipe us out,'" he said. "Quite frankly we could never match the marketing and promotion budgets that these operators have."

But some big-box brands still present too large a psychological hurdle for Toronto shoppers. While we might be salivating over the arrival of Target, the prospect of a downtown Wal-Mart is decidedly less popular.

In 2009, the Ontario Municipal Board backed the city in blocking the development of a Wal-Mart near the intersection of Lake Shore Boulevard and Leslie Street after a concerted neighbourhood campaign.

The chain continues to experiment with smaller, more subtle urban models in U.S. cities, and most commercial developers believe it is only a matter of time before it finds its way onto downtown Toronto streets, popping up under shoppers' feet like the Spadina Dollarama.

Mr. Alikakos said he can't think of a big box brand that would not be accepted somewhere in Toronto.

"I really don't know if there are any," he said. "I think the downtown shopper has a similar mentality as somebody in Oakville or Pickering or Markham or Vaughan. Everybody wants the same thing, and that's to save money."

 

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