Navjot Dulai isn't an experienced retailer, nor is he a real estate tycoon. But when he heard that a former Zellers store in Mississauga was being converted into a retail condominium, he jumped at the chance to own a piece of it.
The clincher for Mr. Dulai, an IT professional with Suncor Energy, is that his neighbours in the Westwood Square mall will include Wal-Mart, FreshCo, LCBO, Shoppers Drug Mart, and major banks such as Canadian Imperial Bank of Commerce. "This is a unique project. It's not everywhere that you can buy a shop inside a mall," says Mr. Dulai, who paid just more than $130,000 for a 130-square-foot unit.
Westwood Square is one of a handful of projects where owner-developers are rethinking the traditional shopping mall formula. Westwood Square, Aberdeen Square in Richmond, B.C., and the proposed Remington Centre in Markham, Ont., are envisaged as a fusion of purchased retail condo units alongside traditional leased spaces occupied by popular specialty store chains as well as department store or big-box anchor tenants.
"We thought it would be a unique opportunity to have the drawing power of the larger anchors while offering people in the community the chance to have ownership in the mall," says Matthew West, vice-president of development for Fieldgate Commercial, which is working with Plazacorp to redevelop Westwood Square.
Fieldgate purchased the 40-year-old mall three years ago, but had difficulty finding a tenant for the Zellers store – which had sat vacant for 10 years – because of its size and two-level configuration, Mr. West explains. "We thought we could renovate it into something new and special and different."
The clustered shops are being marketed as The Shops at Westwood Square, and are touted as "the largest indoor South Asian mall in Canada." The space has been designed in a circular pattern with several shops on the ground floor, with a food court and additional shops on the second level. There will be a large common area where South Asian-themed cultural and community events will take place.
The large and small tenants will "kind of feed off each other," Mr. West explains. The anchors help drive traffic to the mall, while the unique goods and services that will be offered by the owners of the condo units – mostly clothing, handbag, jewellery and accessories and electronic stores – distinguish the mall from competitors.
Other than strip plazas or Chinese-themed malls, such as Pacific Mall in Markham, small retailers have few opportunities to own their own units, let alone buy space in a traditional indoor shopping mall, says Kamal Chohan, a broker with Homelife Maple Leaf Realty Ltd. in Brampton, Ont., who's sold 90 per cent of Westwood Square's 262 retail units.
Yet, there is strong demand among Chinese and South Asian entrepreneurs to own, rather than lease, their business locations. "I would say there is a big appetite for this kind of concept," according to Mr. Chohan, who says buyers at Westwood Square paid from $850 to $1,100 a square foot for units ranging in size from 55 square feet to about 550 square feet.
Cecilia Tse, senior vice-president, Asia Pacific, for Colliers International in Vancouver, says investors from mainland China snapped up 95 per cent of the retail condo units offered for sale in Aberdeen Square, a 160,000-square-foot, six-level retail and office extension of the Aberdeen Centre in Richmond, B.C., that was completed this past summer. Owned and developed by Fairchild Group, the retail aspect features more than 300 stores averaging 400 square feet each. Among the exceptions is a much larger 7,000-square-foot space that Colliers sold to an investor once Royal Bank of Canada agreed to sign on as the more traditional, well-branded tenant.
Investors were excited that Aberdeen Square is directly connected to the Canada Line, part of metropolitan Vancouver's public transit system. "The investors believe in the location," Ms. Tse says.
Location is also an important factor for the Remington Centre that owner-developer Remington Group plans to build next door to the massive Pacific Mall in Markham, which is touted as North America's largest Chinese indoor mall.
The Remington Centre will differentiate itself from the Pacific Mall – where there are more than 450 retail condo units but no large anchor tenants – by creating a mall that has a cluster of Asian-themed stores surrounded by mid- to higher-end mainstream retailers and anchor tenants, says Wayne Chan, vice-president of commercial and residential property investments for Remington Group.
And while Mr. Chan says about 60 per cent of the retail condo units have been sold, the planned 800,000-square-foot mall is years away from completion. The company is still in the process of applying for permission to take down the Market Village mall that sits on the site.
Meanwhile, Mr. Dulai is still mulling whether to open a cellphone shop in his Westwood Square space, or lease the unit to another retailer when the mall opens next spring. At the moment, he's working to arrange financing to purchase a second unit.
"It doesn't matter if I open my own business or not, I consider it to be a good investment," Mr. Dulai says. "It's a shop inside a mall that has major stores like Wal-Mart and FreshCo. For me, it's a 100-per-cent sure thing."
How is a condo mall managed?
Condo malls are similar to residential condos in the way they are managed.
The owners of the retail condo units establish a condominium corporation and pay a continuing management fee to cover the maintenance of the property's building and common areas.
Condo owners are free to run their business out of their retail spaces, lease the space to another retailer or service provider, or to sell the unit. "Property is fairly liquid, whether it's leased or owned, so an investor would have the opportunity to sell their unit to any other purchaser," says James Smerdon, vice-president and director of retail consulting for Colliers in Vancouver.