Skip to main content
Open this photo in gallery:

Shoppers enter and leave a Sears retail store in Toronto on Oct. 19, 2017.Nathan Denette/The Canadian Press

Before there was Nordstrom, there was Sears. As landlords face an influx of vacant retail space after the high-end retailer’s announcement in March that it would close all its 13 Canadian locations by late June, mall owners are still dealing with the hit from the Sears bankruptcy more than five years ago.

The Sears move led to the liquidation of the 140 or so remaining department stores in Canada, mostly anchoring malls across the country – and unleashed more than 15 million square feet of vacant retail space, according to data from commercial real estate services firm JLL.

And while Nordstrom properties face a retail market where the vacancy rate has tightened since COVID-19, Sears landlords were left scrambling to fill acres of unoccupied space.

After the Sears announcement that it would seek protection from creditors, commercial real estate services firm CBRE said, in a report, that a typical backfill of vacant department stores takes up to 36 months but the “complexity of this bankruptcy filing will make this less than typical.”

Reimagining the mall

The Sears departure triggered demolitions and downsizing of the giant department stores into smaller retail and quasi-retail units such as medical offices and health clubs, and cleared the way for regenerating the traditional mall into transit-oriented hubs that include bigger food courts, immersive experiences and new housing.

According to CBRE, some of these changes followed the freeing of landlords from so-called “lease handcuffs” to repurpose or re-tenant with higher paying retailers who could drive greater traffic.

At locations including the CF Fairview Mall in Toronto, the Promenade Shopping Centre in Thornhill, Ont., and McAllister Place in Saint John, the closings triggered extensive redevelopment.

Promenade launched a redesign and expansion complete with new office space and residential apartment buildings all linked to the Promenade rapid transit bus terminal.

Though brick-and-mortar retailing is recovering, there’s still lots of vacant retail space everywhere you look.

Mark Cohen, director of retail studies at Columbia Business School

Some residents opposed the housing densification at Promenade, as well as proposed redevelopment of former Sears property at Eastgate Square in Hamilton, now occupied by apparel retailer Designer Row, although a portion remains vacant – that would add several residential buildings.

City of Hamilton spokesperson Lauren Vastano says a demolition permit was issued in February for the unit at the CF Lime Ridge Mall in Hamilton that had been leased by Sears while “there are current active permits that still need to be reviewed,” for the Eastgate project.

The former Sears property at Stone Road Mall in Guelph, Ont., was razed rather than reconfigured, and in Calgary, Sears spaces have been rented, with some split into units occupied by ventures including a seafood supermarket and a college.

Alistair Corbett, a broker in Calgary with CBRE Canada, says a furniture store operates out of the former Sears location at the city’s North Hill Centre in “a temporary deal until the site gets redeveloped. But they’ve been there for three years already.” He expects the Nordstrom locations in the city will be absorbed as well, he says – “they’re all good locations.”

Pointing to Calgary’s low retail vacancy rate, Michael Kehoe, a broker with Fairfield Commercial Real Estate, also in Calgary, says the city “is seeing high immigration from within Canada and internationally.”

“In many categories,” he says, “they can’t build the space fast enough.”

Retail closings on the rise since COVID

During its heyday into the 1970s, Sears, then Simpson-Sears Ltd. in Canada, was the world’s largest retailer with more than 3,800 Sears and Kmart stores across the United States and Canada and more than 350,000 employees.

“Retail real estate supply exceeded demand throughout North America pre-COVID,” says former Sears Canada chief executive officer Mark Cohen, currently director of retail studies at Columbia Business School in New York. “Now, though brick-and-mortar retailing is recovering, there’s still lots of vacant retail space everywhere you look.”

According to data from commercial realtor Cushman & Wakefield, the closing of major retail outlets in Canada reached a peak in 2020 at 2,076 but declined to 221 the next year. Last year, store closings increased to 1,429, which created about 8.6 million square feet of vacant retail space.

John Crombie, Cushman & Wakefield’s executive managing director of retail services in Canada, says 2021 saw fewer stores winding up due to rent subsidies and rent deferrals during COVID-19, adding that the average number of major chain-store closings in Canada is about 600 a year.

The closings are offset by a decline in the supply of new retail space being built, which fell to a historic low in 2022 of 10 million square feet, he says.

Prepandemic there was about 50 million square feet of new retail space built each year in Canada. “We believe this limited new inventory will support higher rental rates on existing properties,” Mr. Crombie says.

“Retail rents have remained stable,” says Gaurav Mathur, director of equity research analyst – REITs, at Toronto-based wealth management firm iA Private Wealth, adding that retail has “only gotten stronger [post-Sears] but within a few sites rather than all across the market.”

Kate Camenzuli, Toronto-based vice-president of retail at CBRE, says most of the vacated Sears properties have remained retail but have been chopped up into smaller spaces “allowing new product to come into the market.”

The Sears departure has also spurred innovative uses. For example, Canada’s largest in-mall auto dealership occupies a former Sears property at the West Edmonton Mall, and a giant indoor bike park is scheduled to open in early 2023 at North Vancouver’s Capilano Mall after the former Sears space sat empty for more than five years.

Mall repositioning has been “a blessing,” says Peter Morris, founder of B.C.-based Greenstead Consulting Group. He says developers are linking residences and retail by building up in the land-constrained province.

“The traditional mall has been turned inside out,” he says. “They’re being turned into lifestyle centres … that blur the line between life and work.”

Your Globe

Build your personal news feed

Follow topics related to this article:

Check Following for new articles

Interact with The Globe