Real Estate Property Forum RETAIL SECTOR Calgary Market Overview - - PDF document

Real Estate Property Forum

RETAIL SECTOR

Calgary Market Overview

Ralph Huizinga Vice President, Acquisitions & Development First Capital Realty Inc. Calgary

Panelists

Calgary Market Overview

3

Brian Kowall Vice Chairman Royop Development Corporation Calgary

Panelists

Calgary Market Overview

4

Darryl Schmidt Vice President, National Leasing The Cadillac Fairview Corporation Ltd. Calgary

Panelists

Calgary Market Overview

5

Anthony Stokan Founding Partner Anthony Russell Inc. Toronto

Panelists/Keynote Speaker

Calgary Market Overview

6

Rob Walker Vice President/Partner Colliers International Calgary

Moderator

ANTHONY RUSSELL INC COM

Wednesday, October 20th, 2010

Anthony J. Stokan

That Was THEN, This Is NOW…

Did you know?

In 2010, the number of cell phone users worldwide will surpass 5 billion.

The number of text messages sent and received every day exceeds the world’s population.

There are over 1 billion searches performed on Google every day.

As of the 2nd quarter

• f 2010, there were
• ver 500 million active

users on facebook.

If facebook were a country, it would be the 3rd largest in the world, between India and the USA.

The Top 10 in-demand jobs in 2011…

DID NOT EVEN EXIST in 2001.

In less than 5 years China will become…

The # 1 ‘ENGLISH’ speaking country in the WORLD.

During the past 15 minutes, more than 950,000 songs were downloaded illegally.

On April 11th, 2009, unknown Scottish songstress Susan Boyle sang “I Dreamed a Dream” on British TV to an audience of 3.5 million.

Since then, her performance has been viewed more than 150

million times

• n YouTube.

What does it all mean?

SHIFT

happens

The future has a way of arriving

unannounced

Let’s look at three retailers that have profoundly altered retail for the next generation of consumers

Costco Vancouver

Costco Vancouver

Costco: Bulk Buyer’s Paradise

• Costco never sells anything at more

than 14% above cost

• The stores stock 4,000 unique products
• In 2009, Costco sold 91 million hotdog

and soda combos

• Costco’s biggest seller is toilet paper
• Its rotisserie chicken now has its own

Facebook page

Wal-Mart Sales

Fiscal year ended Jan. 31, 2010

$405.0 billion

Up 1% from fiscal 2009

Furnishing Homes Around the World

• Ikea boasts 317 stores in 38 countries

in Europe, the Middle East, Asia, Australia and North America

• Ikea served over 660 million customers

and distributed 200 million catalogues in 2009

• 2009 revenues totaled about 23 billion

Euros (USD $31 billion / up 3.1%)

Perfect for the Global Consumer

• More effectively than any retailer on the

planet, Ikea caters to an expanding global middle class, defined by mobility and pragmatism

• These consumers have a similar

contemporary aesthetic, regardless of ethnicity, religion or country of origin

One Size Fits All

is the mantra of the Ikea business model

• What sells well in one country sells well in

another, and what fails in one market tends to fail everywhere

• Ikea has proven beyond doubt there is no

truth to the idea that consumers around the world are all different… we are not!

• This is the ESSENCE of GLOBALIZATION

Reality 2010:

Saving TIME Online

Today’s Consumer:

TIME-STARVED

The Time-Starved Consumer

• Shopping trips are missions, not

excursions

• Consumers plan purchases in

advance with Internet research

• Polarized retail - specialty retailers

and category killers answer the need for a focused shopping experience

Today’s Consumer:

INFORMED

GOOGLE

Leveled the playing field by greatly increasing the transparency of the marketplace

What was the world like

B.G.

(Before Google)

?

The Informed Consumer

• Websites offer price and feature

comparatives

• Consumer ratings & reviews are a

critical reality . . . Read trend

• Consumers trust each other, rather

than traditional sources of information

Web Research

• Consumers learn about products, services and travel online
• Online research often resembles window shopping or browsing

Pre-Shopping

• 68% searched for product or store

information online before a store visit

• 52% read consumer-written product

reviews online

• 88% said this helped them decide

what product or brand to purchase

People are influenced by the opinions of friends, family, co-workers and complete strangers posting reviews online

Word-of-Mouth = Word-of-Mouse

We now live in a

TRUST

ECONOMY

Consumers have a multitude of opportunities to express their feelings online

The Internet is UBIQUITOUS. Half of Canadians now consider the Internet indispensable to their lives.

Personal Content Generation

Consumers of all ages create and share text, images and video in

• nline discussions, blogs and

podcasts

Interactive video blogs can be used by activists to embarrass retailers, shopping centres and brands for:

• Poor product design and/or

performance… complexity

• Bad customer service
• Poorly maintained fitting rooms,

washrooms & staff areas

Voyeurgasm

• Almost everything is captured by digital

still and video cameras, cell phones and security cameras

• A billion consumers worldwide will own

camera phones by the end of this year!

• Everyone is a photographer

Because the Internet is now indispensable to day-to-day life,

we need to

completely rethink

• ur communications

models

Canada Online

• Canadians spent an average of 41 hours

per month online in 2008, the highest level of Internet use in the world

• More than four-fifths of Canadian Internet

users spend more than 1 hour online daily for personal reasons

• 45% of Canadian Internet users spend at

least 3 hours online each day

Shifting Shopping Trends

• The future of NICHE retailing is selling less of

more

• Consumers will buy less of what’s popular

and more of what suits them

• “Stack it high and watch it fly” will be replaced

by “Now you see it, now you don’t”

5 Trends that Will Change Shopping in the Next Decade

affecting the ways in which virtually everything is sold, marketed and leased

Trend 1: Fragmentation of Big Retail

• Big box assortments no longer meet many consumers’

needs

• Customers will be increasingly informed, demanding

and niche

• Mass merchants Walmart, Home Depot and Costco will

have to fragment into smaller, targeted concepts

• Smaller suburban formats, downtown and express

stores and new online shops will cater to new diversity

• Department stores will lease space to branded shops
• Mixed use development will reinvigorate local

pedestrian-oriented shopping

Trend 2: Retailer as Micro-Celebrity

• The ability to create awareness through social media

will create distribution opportunities for retail startups

• Our concept of how brands develop awareness,

distribution and loyalty will change dramatically

• Brands will have shorter life spans because of lower

barriers to competitive entry for new brands

• Small companies will build micro-celebrity around their

brands through social media and pop-up retail concepts

• Using social media, new brands will be able to fast-

track growth and penetration

Trend 3: Products Searching for People

• Personalized web browsers will learn about users and

return more custom-tailored, relevant results

• Geography, age, gender, social networks and purchase

habits will personalize search results

• Marketers will be able to program messages to find the

right consumers for specific products

• Social networks will help marketers map out paths to

consumers who index highly against products due to friendships, occupation and proximity to distribution

• The result: rapid connections between products and the

people they’re designed for

Trend 4: Automated Versus Animated Store Experiences

• Personal shopping apps, RFID tags and mobile

payment options will create 100% self-serve stores

• Unmanned 24-hour stores will be increasingly common
• Staff will only be present to tidy the store or restock
• Consumers will prefer this for routine transactions
• High-quality retailers will charge a premium for fully

animated, “human” experiences

• Skilled, well-paid staff will deliver a concierge level of

service before, during and after sales

• Fully animated retail will represent a smaller share of

the market, but will be disproportionately profitable

Trend 5: Data (finally) Creates Value

• Mobile marketing and point of sale interaction have

revolutionized real-time consumer data collection

• Major retailers will invest in turning their vast supply of

consumer data into actionable strategy

• Because each mobile device is unique, retailers will be

able to track the patronage patterns of consumers in their stores

• Near Field Communication between mobile devices and

in-store signage in displays will reveal customer navigation patterns and product interests

• Mobile payment technology will make it possible for

consumers to provide feedback within seconds of a store visit

Combined, these five trends create a perfect storm of change: an environment where everything we knew about the sales and marketing of just about everything needs to be rethought. As consumers, this makes

• ur lives more exciting in

many ways.

The Power of Social Media

• Social media is the number one

activity on the web

• Generations Y and Z consider

email passé

• The fastest growing segment on

Facebook is 55 to 65 year old women

The Power of Social Media

• 14% of people say they trust ads,

while 78% trust social media peers

• There are more than 200 million

blogs, and more than half tweet or post content daily

• 25% of Americans watched a short

video on their phone last month

• We no longer search for news –

news finds us

• Soon, products will find us too

10 Fundamental Trends

that don’t change with economic uncertainty

1.

Right now there are hundreds of thousands of new products, markets, industries and ideas being built and explored. The future isn’t over – its arrival has just been slowed down.

2.

People want to talk about innovation, change, and the future

3.

Green initiatives and energy maximization will have more daily significance (OIL is not the future)

4.

Consumers want genuine engagement

5.

Technology will continue to hyper- innovate… it’s the new fashion

6.

Agility and flexibility will dominate and win the game Be PROACTIVE rather than REACTIVE!

7.

The Internet continues to have a PROFOUND IMPACT on EVERYTHING we do !!!

8.

BOOMERS are so NOT ready to retire… especially given the status of their RRSP’s

9.

In a fast world, things happen faster! Innovation will drive us

• ut of this faster than we

expect!

10.

BIG change comes from BIG ideas, sponsored by those who lead with BIG dreams We are living in

Transformative Times

One day in the not- too-distant future, a headline will read:

ECONOMIC GROWTH RETURNS!

…JUST NOT IN THE WAY ANYONE EXPECTED!

ANTHONY RUSSELL INC COM

State of the Union

Four Horsemen of the Real Estate Apocalypse

92

►

Dropping Rental Rates

►

Climbing Vacancies

►

Rising Cap Rates

►

Falling Loan to Value Ratios

2008 - 2009

Four Horsemen of the Real Estate Apocalypse

93

►

Rising Rental Rates

►

Dropping Vacancies

►

Dropping Cap Rates

►

Abundant Equity/Debt for Retail Investment

2010

Calgary Retail Market Highlights

94

►

Retail is alive and well! – Thriving

►

Current market vacancy rate: 1.44% (October 2010)

►

October 2009 vacancy rate: 1.71%

►

October 2009 streetfront vacancy rate: 3.83%

►

Current streetfront vacancy rate: 1.75% (October 2010)

►

Inventory added in 2010 YTD: 487,407 sq. ft.

►

Retail under construction: 615,300 sq. ft.

►

Proposed retail to be developed: 8,069,500 sq. ft. over 19 projects

Calgary Retail Market Highlights

95

►

2010 annual retail stales in Alberta are projected to increase 0.6%

►

Retail sales in Calgary are expected to increase 3.9% in 2010, and a further 7% in 2011

►

Monthly (July) retail sales in Alberta exceeded BC by $133,000,000 – annualized: $1.59 Billion

►

Alberta has 810,000 fewer residents than BC

96

Per Capita Monthly (July) Retail Trade by Province

97

Streetfront Vacancy Rates

98

Calgary Retail Vacancy Rates

Rental Rates

99

►

Relatively stable for the most part in Strip Centre (under 50,000

• sq. ft.), and Neighbourhood Centre (50,000 – 100,000 sq. ft.).

►

Increasing 3% to 12% across the board for the most part in Community Centres (100,000 sq. ft.+) and Regional Shopping Centres.

►

Streetfront rental rates have dropped as much as 20% in 2009, however we are seeing the drop stabilize with notable streetfront projects seeing an increase.

►

Tenant inducements (allowance/free rent) have decreased as rents increase

Proposed Retail Projects

100

►

19 projects currently proposed in Calgary

►

Combined area of 8,069,500 square feet

►

Summary by quadrant:

►

NE = 2,750,000 sq. ft.

►

SE = 2,593,000 sq. ft.

►

NW = 2,325,000 sq. ft.

►

SW = 401,000 sq. ft.

Retailers New or Expected to be in the Calgary Market

101 ►

Target

►

Lowes

►

Marshall’s

►

Kohl’s

►

Crate & Barrel

►

Keihl’s

►

Brooks Brothers

►

Victoria Secret

►

Bed Bath & Beyond

►

Save-On-Foods

Summary

102

►

Calgary’s Retail Market remained very stable in 2010

►

Increasing optimism by retailers, developers and most importantly - Consumers

►

Consumer confidence

►

Unemployment levels have stabilized, and decreased

►

Stabilized housing prices

►

Low/stable inflation

►

Relatively stable oil prices

►

Credit (Equity and debt) is much easier to obtain in 2010

►

Stabilized and increasing retail sales, and profit levels

►

Residential growth

Thank You