Nordstrom Inc. (NYSE:JWN)’s early March announcement that it will close its 230,000-sq.-ft store at CF Pacific Centre by June prompted business community fears that the city’s downtown core will take an economic hit.
The level of short-term adversity businesses face depends in part on what mall-owner Cadillac Fairview decides to do with its space, and how fast it acts to reopen the building.
Cadillac Fairview’s senior vice-president for Canadian retail, Tom Knoepfel, told BIV that many potential tenants have contacted him.
“We’ve had significant interest from multiple parties considering leasing all of the space, and a portion of the space,” he said.
“We’re confident that we’ll be able to put together a retail offering that the general public will once again be excited about.”
Cadillac Fairview does its leasing internally, without outside brokers, so Knoepfel is aware of all interested parties, he said.
Most parties that have expressed interest are retailers, although “there have been other groups as well.”
Knoepfel anticipates that the site will remain a retail hub. The question is whether one tenant will take the entire space, or whether Cadillac Fairview will redevelop the inside space to accommodate “three to five” retailers that would have flagship stores, he said.
Finding large blocks of retail space downtown has long been a challenge for retailers.
When global fashion giant Uniqlo opened its first B.C. location at Metropolis at Metrotown in October 2017, its CEO, Tadashi Yanai, visited the region and told BIV that he wanted to open the company’s first Canadian store in downtown Vancouver, but Uniqlo operatives could not find appropriate space for the right price.
The result was that he opened the company’s first two Canadian stores in the Greater Toronto Area: A 33,400-square-foot location at CF Toronto Eaton Centre, and a 30,000-square-foot store at Yorkdale Shopping Centre.
Uniqlo has yet to open a store in the City of Vancouver.
Speculation has swirled that Quebec City-based La Maison Simons could fill the Nordstrom site. It operates a 100,000-square-foot store at Park Royal in West Vancouver, and has larger stores in its chain – though none as large as 230,000 square feet. It has multiple locations in several Canadian metropolitan areas, such as Quebec City, Montreal and Edmonton, so a second Simons store in Metro Vancouver would not be an unusual addition.
IKEA’s suburban stores tend to be larger than the Nordstrom site. Its Richmond location, for example, is approximately 334,000 square feet.
The company has started opening smaller urban locations, such as a 66,000-square-foot store in downtown Toronto, so a similarly sized store in downtown Vancouver would continue that retail strategy.
“We’re going to take however long it takes to make the best decision for that space, and for downtown Vancouver,” Knoepfel said.
Reconstructing the mall into several smaller footprints would likely enable Cadillac Fairview to charge more per square foot than if it leased the entire space to one tenant.
Doing the construction work to split up the mall, however, would likely cost tens of millions of dollars, and could take two years or more.
(Image: Cherry blossoms were budding last week, across the street from Nordstrom | Rob Kruyt)
Hit to street traffic may impact some lease-renewal discussions
Large nearby landowners like the idea of multiple tenants, rather than a single department store, occupying the Nordstrom site.
“The classic department stores, where there was everything for everybody, has sort of died,” Bonnis Properties principal Kerry Bonnis told BIV.
His company, which he runs with brother Dino Bonnis, owns the building across Granville Street from Nordstrom, where there are tenants such as TJX Companies Inc.-owned (NYSE:TJX) Winners, and Best Buy Co. Inc. (NYSE:BBY). The space includes street-front retailers and stretches north to the Vancouver Block Building.
He said he believes that if the site has a single tenant, it would be best for that occupant to include boutique stores, or internal kiosks, run directly by different brands.
The west side of the block of Granville Street between West Georgia and Robson streets has entrances to Nordstrom at each end, but is otherwise a monolithic wall with some windows, closed service doors and cladding.
Bonnis said punching multiple new entrances into that long stretch of wall, to enable multiple storefronts, should not be difficult.
“Cadillac Fairview did significant seismic upgrading work when Nordstrom first went in, so I think most of this work wouldn’t take much demolition because it’s all an open plan,” he said.
“Throwing up storefronts is actually something that can be done in a matter of weeks.”
Getting city permits to do that work, however, could take much longer, he added.
Bonnis has been in discussions with the City of Vancouver to allow him to redevelop the eastern side of the 800-block of Granville Street, one block south of Nordstrom, which his company also owns.
Bonnis wants to build an office tower above much of that block, while simultaneously keeping the facade of the Commodore Ballroom, upgrading the Granville Street entrance to the Orpheum and adding back-of-house infrastructure improvements to enable a faster turnaround for performers.
(Image: Cadillac Fairview's reconstruction of the former Four Seasons Hotel building is continuing with no set time for completion | Rob Kruyt)
One project that could help provide more street traffic downtown is Cadillac Fairview’s redevelopment of the site on Howe Street north of West Georgia Street that formerly housed the Four Seasons Hotel.
“I can’t comment on timing, but we’re continuing to pursue plans for a luxury hotel for that building,” Knoepfel said.
“We’ll partner with one of the major [hotel] banners. We won’t run it ourselves.”
Vacant Nordstrom space could hurt nearby businesses
Nordstrom hired about 1,000 employees, including 44 managers, for its Vancouver store when it opened in 2015.
Those people spent money at nearby restaurants, and at retailers before and after their shifts.
Countless others, who made Nordstrom a shopping destination, also patronized area businesses, and may no longer come downtown.
Having an empty shell of a building is likely to reduce sales for businesses on neighbouring streets, said Colliers International associate vice-president Sherman Scott.
“A lot of nearby businesses located there for a reason,” he said.
“Until that [former Nordstrom space] is regenerated and operating, I think you’ll see a decline in sales for nearby businesses. It remains to be seen if they can weather any potential storm until the new [Nordstrom site] tenants are operating.”
He expects tenants on Granville Street to be particularly hurt.
Bonnis, however, said that he has started lease-renewal negotiations with multiple tenants, and some of those talks started after Nordstrom’s announcement that it would leave Vancouver.
Scott said he believes any drop in street traffic – due to Nordstrom’s exit – could push down lease-renewal rates for Granville Street businesses.
Bonnis would not say whether he would be willing to reduce his lease-rate expectations for Granville Street tenants from what they were before Nordstrom announced its exit.
“The lease rates are not based on Nordstrom,” he said. “They’re based on how busy Granville Street is, and the corner of Granville and Robson streets still remains one of the busiest intersections in the city.”
Some tenants, he said, have 10-year leases coming up for renewal so those business owners should expect rate increases because it has been so long since they last had one.
Businesses west of Nordstrom should be able to fare better than those to the east, Scott said. He pointed to low vacancy on Alberni Street, and high demand for the scarce luxury retail space it offers.
“On Robson Street, really it is the 900- and 1,000-blocks that are super strong from a retailing perspective, and there’s not a lot of vacancy, so I don’t really see a major disruption there either.”
The Downtown Vancouver Business Improvement Association (Downtown Van) advocates for businesses east of the Nordstrom site, but its acting CEO, Jane Talbot, was not available to discuss how those businesses could be impacted by the retailer’s exit, or her organization’s annual state of the downtown report, set to be released tomorrow (April 5).
Last year’s Downtown Van state of the downtown report found that downtown Vancouver had 1,015 street-level commercial spaces, 85 per cent of which were open for business, while 2.2 per cent were leased, with businesses opening soon.
The four main retail corridors in Downtown Van’s area – Granville, Alberni, Robson and West Hastings – performed worse than downtown as a whole, according to the organization’s 2022 report, with 365 street-level units, 81 per cent of which were open.
Scott said downtown retail vacancies have been on the rise.
Colliers’ data from the end of 2022 showed downtown Vancouver’s retail vacancy rate at four per cent, up from 2.6 per cent six months earlier.
He said his observations are that there has been a slight reduction in property crime and broken windows, although there remain many cases where vandals smash glass at businesses, or at bus stops, seemingly for no reason.
There was also a stabbing death on March 26 at the Starbucks at the corner of Granville and West Pender streets.
“It is still far from ideal, as there are major issues and challenges that the city and police need to look at,” he said.
“Gastown, pre-COVID, was a very popular place to be, with edgy-type retailers, and restaurants. It has taken a real hit. It has improved slightly from during COVID, but it’s still not what it was.” •
