Canadian shoppers who love outlet malls but not the cross-border drive required to reach them will soon be in retail heaven. A new breed of retail space is set to open in Canada next year: the American-style, high-end outlet mall, featuring prices at 30 to 70 per cent off regular retail in attractive, pedestrian-friendly plazas.
"We've always felt that this segment was underserved in the Canadian marketplace," said Al Mawani, president and chief executive officer of Toronto-based Calloway REIT, the Canadian contingent of one of the partnerships bringing these malls northward.
"We had been, for quite a while, looking for a way to bring [the outlet mall] concept to Canada. Very early on we realized that the best way to enter this particular venture would be to partner with an experienced, best-of-breed developer in the States and have a number of the tenants come from the States."
Unlike power centres, where shoppers often drive across vast parking lots from one warehouse-type store to another, shoppers at these outlet malls park their cars and walk from more manageably sized outlets such as Banana Republic to Brooks Brothers, and from Guess to Gucci. This retail format has just about saturated the American suburbs, and their tenants, prominent U.S. retailers that have well-honed outlet strategies, are eager to bring the concept to Canada.
Milton Lamb, senior vice-president and broker at Colliers International, believes that Canada is under-retailed and that every major Canadian market could handle up to two outlet malls each. But building more than that, or building them too close together, could be a negative.
"Where you see problems is in the United States where two outlet malls go in across the street from each other and just end up stealing each other's tenants and they don't get any momentum," Mr. Lamb said.
But in Mississauga and Halton Hills, two municipalities just west of Toronto, that's exactly what might unfold in the next few years.
The first outlet mall scheduled to open is a joint venture between Calloway REIT – which is 20 per cent owned by, and a strategic partner of, big-box plaza developer SmartCentres Inc. – and Simon Property Group Inc., the largest public real estate company in the United States.
Toronto Premium Outlets will house about 85 stores in 350,000 square feet of retail space when phase one opens next summer at Highway 401 and Trafalgar Road, just west of the city.
Once completed, it will be about a 10-minute drive from the development site of another major outlet mall, this one a joint venture between North Carolina's Tanger Factory Outlet Centers Inc. and Toronto's RioCan REIT.
The Calloway-Simon partnership is par for the course for Simon Property Group, which already operates outlet malls through joint ventures with local partners in Mexico, Malaysia, Japan and Korea. And now, said John Klein, president of Simon subsidiary Premium Outlets, the time is right for expansion into Canada.
"In the last 10 years more and more international brands have opened their own stores in Canada. So now that they've opened their retail stores in Canada, they have a demand for outlets as well," said Mr. Klein, whose company headquarters is in Indianapolis. "And the Canadian economy is doing quite well, in particular in comparison to other parts of the world. So our timing is very good, I think."
The Calloway-Simon joint venture announced in May that it also plans to begin construction of Montreal Premium Outlets in Mirabel, Que., 20 minutes north of Montreal, in 2013. And the partnership will be looking at other markets in Canada over the next few years, according to Mr. Klein.
Of course, the Premium Outlets won't be the only choice for bargain-hunting shoppers. The RioCan-Tanger joint venture is planning a similar rollout across the country.
That partnership, announced in early 2011, has said that it's planning to bring its successful strategy to Canada by opening up to 12 outlet malls, branded as Tanger Outlet Centers, over the next five to seven years. In December it purchased Cookstown Outlet Mall, about 75 kilometres north of Toronto, which it plans to expand and, likely, fill with high-end clothing stores, mostly from south of the border.
The Tanger-RioCan joint venture, whose spokespeople would not comment for this article, has also announced plans to build a 312,000-square-foot outlet mall at the Heartland Town Centre, about 15 kilometres east of the Toronto area Simon-Calloway project. And in the Ottawa area, it has announced plans to acquire 50 acres of land to build a Tanger Outlet Center just off the TransCanada Highway in Kanata.
When Tanger-RioCan announced its intention to develop its first outlet mall, RioCan president and CEO Edward Sonshine said in a news release that "this venture will fill a void in the Canadian retail marketplace. …This property type will be unique in Canada."
Obviously, that isn't the case any more.
Premium's Mr. Klein wouldn't speak specifically about the impending competition, but emphasized that construction is well under way at Toronto Premium Outlets, unlike at the future Tanger centre nearby.
"We're focused on our business and our opportunities," Mr. Klein said. "We think we have a great development under construction."
These indoor shopping centres usually have two or three large anchor tenants, such as The Bay or Sears, and dozens of other retailers offering apparel and housewares at full price or on sale seasonally.
These shopping centres feature multiple large-format or big-box stores, such as Rona or Best Buy, around the perimeter of a vast parking lot. They are usually in the suburbs, but can also be found in urban areas where brownfields have been redeveloped – such as Toronto's Leaside neighbourhood.
These are typically outdoor shopping centres that are pedestrian friendly, featuring covered walkways or canopies, benches and fountains. Retailers are usually clothing stores selling goods specifically created for their outlets at 30 to 70 per cent off full price. They are almost exclusively located in the suburbs.