Skip to main content

The Globe and Mail

As stores close, Canadian mall owners turn prime land into condos

Toronto’s Yorkdale Shopping Centre is Canada’s most productive mall, but even Yorkdale’s owner is seeking to add residential units, offices and hotel space in a planned revamp.

JENNIFER ROBERTS/The Globe and Mail

Canadian mall owners are adding condos and apartments to their shopping centres, seeking to capitalize on a supply-constrained housing market while reducing exposure to a struggling retail sector.

Developers such as RioCan REIT, Canada's largest property trust, and the property units of some Canadian pension funds are turning prime land that has historically not been put to best use – such as parking lots or low-rise retail – into housing in one of the world's most expensive, supply-constrained residential markets.

In the Greater Toronto Area, there were 12,500 new homes available to purchase in October, less than half the average between October, 2000, and 2015, according to Altus Group.

Story continues below advertisement

The rental market is just as tight. Toronto has a 1-per-cent rental vacancy rate, according to the Canada Mortgage and Housing Corp. That was despite the highest level of rental construction in 25 years in the third quarter, according to Urbanation Inc. Home prices have surged more than 60 per cent in Vancouver and 40 per cent in Toronto in the past three years. Even pullbacks in these markets this year following policies to dampen price gains appear to be reversing on continued demand and limited supply.

"The population is growing and there's no real land left" in Canada's biggest cities, RioCan chief executive Ed Sonshine said. "Demand for retail space isn't growing … it makes perfect sense on so many levels."

In Toronto, RioCan is creating ePlace, a development with about a fifth of the retail space of some of its other malls, 1,100 condominiums and apartments, and some offices.

The 466 rental apartments will add the first of 10,000 residential units the shopping-centre developer plans to own by 2025 across 50 properties.

Buyers are responding. All the condos at ePlace, expected to be completed by early 2019, have already been sold.

Even owners of thriving malls are joining in. Yorkdale Shopping Centre in Toronto is Canada's most productive mall, with $1,653 of sales per square foot for the year ended June 30, according to a Retail Council of Canada study. But owner Oxford Properties, the real estate unit of the Ontario Municipal Employees Retirement System, is seeking to add as many as 1,496 residential units, offices and hotel space under a planned revamp.

Oxford is betting that better public transit and technological changes such as autonomous vehicles will reduce demand for parking, said Bradley Jones, head of retail at Oxford.

Story continues below advertisement

Rising retail vacancies, exacerbated by the recent demise of Sears Canada and Target Corp.'s Canadian operations, "have caused even more people to start thinking that there are alternate uses for part of their sites," said Matthew Smith, head of national retail investment at Jones Lang LaSalle.

And, if a concentration of retailers around transport nodes is weighing on businesses despite their location, changing some to residential could reduce that burden, Mr. Smith said.

It's not simply about plopping a few apartments on or adjacent to existing malls, however. Owners such as Cadillac Fairview (CF), a unit of the Ontario Teachers' Pension Plan, have concluded that the traditional mall, anchored by department stores with chain stores and fast-food restaurants in between, may no longer be as profitable.

CF plans to spend about $2-billion to add residential units at four of its malls, in addition to one under construction in Toronto, said Finley McEwen, its senior vice-president for development.

"Mixing uses creates a vibrancy after hours, they create safer streets … And they become naturally more attractive."

Report an error
As of December 20, 2017, we have temporarily removed commenting from our articles. We hope to have this resolved by the end of January 2018. Thank you for your patience. If you are looking to give feedback on our new site, please send it along to feedback@globeandmail.com. If you want to write a letter to the editor, please forward to letters@globeandmail.com.