Anyone who has renovated a home knows it can be a tedious, frustrating and expensive endeavour. But at least a family can bunk with the in-laws or rent an apartment until the dust settles.
When renovating a shopping mall, that’s not an option.
“It would be so easy to go and shut an entire area down, blast it, demolish it and rebuild it,” says David Baffa, senior vice-president of retail development for Central Canada, at Ivanhoé Cambridge, which has just started a $230-million renovation and expansion of the Oshawa Centre, 60 kilometres east of Toronto. “But you just can’t do that.”
Instead, crews work mainly at night when the mall is closed, in carefully choreographed steps to avoid inconveniencing shoppers and retailers. Contractors must keep a lid on noise and dust plus make sure that emergency exits and fire access points remain fully operational. And shoppers heading to Hudson’s Bay for makeup or The Gap for back-to-school clothes still need ample parking seven days a week, despite lots crammed full of construction equipment.
Even with the best planning and sequential project management, malls tend to lose customers while under construction. And when that construction is scheduled to take almost three years, as at the Oshawa Centre, or three-and-a-half years, which is the timeline for the $350-million expansion and renovation at west Toronto’s Sherway Gardens, that can translate into hard times for hundreds of retailers.
Sherway has not seen a “material” drop in customers since renovations started in January, says Finley McEwen, senior vice-president of development, for mall owner Cadillac Fairview Corp. But he concedes that during major construction “mall traffic drops off.”
“You close down part of the parking lot and put the mall into a state of renovation, and you’re likely going to see a drop in pedestrian traffic,” says Mr. McEwen, adding that construction will be scaled back and parking spots opened up again in November and December, during the crucial holiday shopping season.
The Oshawa Centre, which will have more than 1.2 million square feet of leasable area up from 990,000 square feet when it’s completed, is deep into demolition this summer – but remains fully in operation. A plethora of empty parking spots there on a recent summer weekend hinted that many would-be shoppers are staying away, for now.
“When you’re impacting appearance, access and parking, yes, some people might get put off,” Mr. Baffa says. “But we’re fortunate enough that we might see a drop in traffic but it doesn’t necessarily translate into a drop in sales or performance.”
Mr. Baffa attributes that to clients changing their shopping patterns, such as making fewer trips to the mall but spending more money in each trip.
Larry Rosen, chief executive officer of high-end men’s clothier Harry Rosen, also maintains that his 16 stores – including the one at Sherway, which he’s relocating and doubling in size by 2015 – don’t see a drop in sales while their host mall is being renovated. Many Harry Rosen customers do business by appointment and are encouraged by sales staff to come in during off-peak hours, such as mornings, when mall parking is easier.
“Renovating a shopping mall is a bit of a two-edged sword,” Mr. Rosen says. “But when we upgrade a store our customers enjoy the store more, buy more and we add more customers that we didn’t have before.”
He speaks from experience. Mr. Rosen did a major overhaul on his flagship Bloor Street store in Toronto five years ago.
“We added two floors to an existing building and renovated the interior without missing a minute of business,” Mr. Rosen says. “Construction is more expensive and it takes longer when you’re trying to keep the place suitable and appealing for clients.”
He has seen what a bigger, brighter mall with more high-end stores can do for his shops at Toronto’s recently renovated Eaton Centre and Yorkdale Shopping Centre, at the upgraded high-end Pacific Centre in downtown Vancouver and Chinook Centre in Calgary, to name a few.
For Mr. McEwen, upgrading a mall like Sherway, which was originally built in 1971 and has been owned by Cadillac Fairview since 2000, is an obligation, not an option.
“We’re in the business of running first-class shopping centres with best-in-class retail shopping experiences, so that means you have to renovate from time to time,” Mr. McEwan says.
At Sherway, “best-in-class” includes returning to the same site in France from which its original beige limestone floor was quarried to source materials for the mall’s current 300,000-square-foot expansion.
“We actually sent designers to make sure the colour of the stone we’re getting is the same as what was originally put there,” Mr. McEwan says.
It’s not unusual for tenant retailers at these Tier 1 malls to sign leases for 10 years or more, so they might not know of a coming construction project when they agree to rent space. And while it might seem like a cruel surprise to spring a three-year construction project on a newly signed tenant, it’s just part of the retail landscape, Mr. McEwan says.
“Our more sophisticated retail clients would normally expect a renovation on some kind of regular cycle,” Mr. McEwan adds.
That certainly holds true for Mr. Rosen.
“The A-plus malls across the country are all expanding and, unfortunately, commanding more rent,” Mr. Rosen says. “But it’s just one of those things you have to go through to get to a better place.”
Pack a little patience if you plan to shop at these Toronto-area malls in the next few years.
- Owner: Ivanhoé Cambridge
- Construction dates: June of 2013 to spring of 2016
- Current size: 990,000 square feet
- Size after expansion: 1.2 million square feet
- Projected cost: $230-million
- Owner: Cadillac Fairview Corp.
- Construction dates: January of 2013 to fall of 2016
- Current size: 985,000 square feet
- Size after expansion: 1.3 million square feet
- Projected cost: $350-million
- Owner: Oxford Properties Group Inc.
- Construction dates: January of 2014 to fall of 2016
- Current size: 1.6 million square feet
- Size after expansion: 1.9 million square feet
- Projected cost: $331-million