Ivanhoé Cambridge isn’t wasting any time as it seeks to carve out its niche in the fast-growing and uber competitive outlet mall space.
The real estate arm of Caisse de dépôt et placement du Québec will open a new eight-building outlet mall in Niagara-on-the-Lake, Ont., on May 15.
Sitting on 63 acres of land, the $178-million open-air mall will have about 100 stores and more than 2,300 parking spots.
It marks the first of its kind for Ivanhoé: a pure outlet centre. But it won’t be the last. Another is slated to open at Edmonton International Airport in the fall of 2016. One more is likely to be announced within a month, and at least one, if not two more, by the end of the year, says Teresa Spataro, vice-president of development leasing at Ivanhoé.
“We’re really, really hustling here,” she says.
That’s because outlets are where the action is now.
A mainstay in the U.S. retail space, the concept was slow to trickle across the border. Now that it’s finally here, consumers can’t get enough, says John Crombie, senior managing director of retail services at Cushman & Wakefield in Canada.
“The Canadian consumers love it,” he says. And so for the retailers, it’s been a success. “Stores in outlet malls tend to be truly good, even though the rents are high,” he says. “The sales can be very high. You hear of Coach pulling off $5,000 a square foot in terms of sales, just crazy numbers.”
Rather than adopting a cookie-cutter format, Ivanhoé is trying to adapt each of its malls to their surroundings. It is, for example, seeking to promote wine at the Niagara outlet and First Nations art at a new hybrid mall that’s under construction on Tsawwassen First Nation lands in British Columbia. In Edmonton, the company is creating an outlet centre with a roof to accommodate the climate.
Other developers are responding, too. A number of them have been pushing into this space in Canada, including Simon Property Group Inc. (in partnership with Calloway Real Estate Investment Trust), British-based McArthur Glen Group, and North Carolina’s Tanger Factory Outlet Centres Inc., which formed a partnership with Toronto-based RioCan Real Estate Investment Trust in 2011 and said that it would open up to a dozen outlet malls in Canada.
Retailers like outlets because they enable them to attract a broader group of customers than their traditional stores would alone. “Retailers are looking for new channels to access customers and share of wallet,” says Tom Balkos, senior vice-president and Canadian director of the retail services group at CBRE in Canada.
But they were slow to warm to the concept of outlets in Canada.
Back when Ivanhoé Cambridge looked to open its Vaughan Mills centre, a so-called “hybrid” mall that is part outlet, it took eight years to get off the ground. That’s in large part because it took much longer than expected to sign on enough unique anchor tenants to make it work.
“It was actually quite controversial at the time because it was a new form of retail,” says Paul Gleeson, executive vice-president of global development at Ivanhoé Cambridge.
“A lot of our competitors and the retailers didn’t think it was going to be successful because it was new: It wasn’t going to be anchored by a Sears or Bay or Eatons. Instead we ended up having 17 anchors, the main one was Bass Pro Shops. Power centres had major anchors like Winners, and we incorporated those types of anchors into Vaughan Mills, and we also introduced an outlet component. In the U.S. outlets were more evolved, it was really at the infancy of retailers starting to develop outlet concepts.”
Vaughan Mills opened in 2004. What a difference a decade makes.
But Mr. Gleeson is of the opinion that there’s a risk that more outlets will be built than the country really needs.
With Niagara in hand and Edmonton under way, “we think there’s an opportunity to do three to five more of these in Canada,” he says. “I know some of our competitors think they can do more, but we focus more on superior locations in superior markets.”
While outlets are popular right now, their success isn’t assured. And finding the perfect site is a big challenge.
Accessibility by car is key – outlet malls ideally should be on major highways right off interchanges, Mr. Gleeson says. The price of the land is imperative to making the project work.
“The other thing about outlet malls is they’ve got to be far enough away from a retailer’s full-price stores,” notes Mr. Crombie. They don’t want to cannibalize their full-price sales.
The hunt for cheap land and distance from full-price stores is part of the reason why outlets are located outside of major urban centres. But they can’t be too far out.
“If the population base is too small then it won’t make any sense,” Ms. Spataro says.
She says Ivanhoé Cambridge chose Niagara not to appeal to cross-border shoppers, but “because it’s the largest tourist attraction in the country.”
To draw a crowd it’s important to attract a strong stable of retailers and, increasingly, offer other features, such as good dining options.
“As they say, it’s got to be worth the drive to Acton,” Mr. Crombie says, alluding to an Acton, Ont., leather shop’s catchphrase. “It’s got to be worth the drive to the outlet mall.”
“We’ve learned that if you create the right type of tenant mix, the consumer will drive past their traditional shopping to shop [at the outlet mall],” Ms. Spataro says.
At the same time, developers and retailers are banking on the notion that if a customer has driven far enough to reach the mall, they will not want to leave it without making significant purchases.
Because location is paramount, players in this game sometimes seek to lock land down conditionally when they can find it, and then they cross their fingers and hope that they can attract the right retailers and make it happen.
“Most developers’ bets are placed already in most markets,” Mr. Balkos says. “And it’s often just a race to sign up the tenants and get entitlements.”
Niagara-on-the-Lake outlet mall by the numbers
– About 100 stores, including Brooks Brothers, Calvin Klein, Forever 21, Nine West and Tommy Hilfiger.
– 85 per cent preleased months before opening.
– Eight buildings with 520,000 square feet of gross leasable area.
– A second phase would increase the size to 650,000 square feet.
– 63 acres of land
– A March 1 job fair looking for 1,500 full- and part-time employees drew 4,000 applicants.
Source: Ivanhoé Cambridge