Focus: Homebound workers inject life into suburban malls after downtowns empty out

RioCan Real Estate Investment Trust

09/11/2020 11:00

(Repeats story published on Sunday.)
    By Nichola Saminather and Victoria Waldersee
    TORONTO/LISBON, Nov 8 (Reuters) - As the coronavirus
pandemic rages and most downtown office employees in many cities
work from home at least through year-end, urban retailers' loss
is turning out to be suburban shopping centres' gain. 
    For many years, downtown malls have been more profitable,
attracting office-goers and tourists congregating in city
centres, while suburban malls have been relegated to the role of
poor relations.
    The coronavirus pandemic is turning that on its head.
   "A lot of people who used to commute to downtowns on a daily
basis are not anymore," said Tim Sanderson, head of Canadian
retail at real estate services firm JLL  JLL.N  in Toronto.
"Where are they getting dry cleaning done, picking up dinner?
... They're doing it in their suburban shopping centre."
    Traffic in Canadian suburban malls owned by Cadillac
Fairview, the property unit of Ontario Teachers' Pension Plan,
is now at more than 70% of pre-pandemic levels, while less than
half of shoppers have returned to its downtown malls, Executive
Vice President of Operations Sal Ianoco told Reuters. 
    The same story reverberates around the globe.
    In the UK, foot traffic was down 40% and 34.6%,
respectively, in high streets and shopping centres in
mid-October compared with a year earlier, while retail parks saw
a decline of only 13.2% from last year, data from analytics firm
Springboard showed.
    While mall owners with both urban and suburban locations are
expected to weather the hit from the pandemic,
already-beleaguered retailers in downtown shopping centres face
much bleaker prospects. 
    With the crucial year-end holiday shopping season looming
and few shoppers expected to turn up at downtown malls, the
surge in permanent store closures and bankruptcies already seen
this year is likely to worsen.  
    Jaap Tonckens, chief financial officer of
Unibail-Rodamco-Westfield  URW.AS , Europe's largest property
owner, told Reuters the group is "absolutely" seeing local malls
do better than downtown counterparts. 
    German mall operator ECE, which runs nearly 200 shopping
centres across Europe, said that while footfall has returned to
around 90% of last year's levels in neighbourhood locations,
city centre malls remain at around two-thirds. 
    "The coronavirus crisis is acting like a fire accelerator to
the problems of downtown areas," including falling rents and
rising prices and labour costs, German Economy Minister Peter
Altmaier said last month.
     
    EERILY QUIET    
    The return of office staff has been "much slower than we
thought," Toronto Mayor John Tory told Reuters, flagging the
continued risk to downtown retail businesses as workers and
tourists stay away as the holidays approach.
    "Obviously public health has to come first, but anything
they can be doing to have people return to work will help the
viability of those businesses," Tory said.
    At lunchtime on a Friday before a long weekend, Cadillac
Fairview's landmark Eaton Centre in downtown Toronto, North
America's busiest mall before the pandemic, remained eerily
quiet.
    A few shoppers wandered through, but at most stores, staff
outnumbered customers despite large discounts. Its eateries,
which had had lines spilling out their doors before the
outbreak, were deserted. 
    At Fairview and Yorkdale Shopping Centres in the northern
Toronto suburb of North York, it was a different story. Despite
limited store capacities, weekday shoppers converged on stores
from Apple to Zara to Louis Vuitton. 
    "Because we're not working in the (downtown Toronto) office
... we just stick around the area that's closer to us," Tamara,
who declined to provide her last name, told Reuters as she
shopped in Yorkdale with her husband.
    Within suburbs, outlet malls and unenclosed shopping centers
- the former luring cost-conscious shoppers in uncertain
economic times, and the latter seen as safer amid the
coronavirus outbreak - have fared better than enclosed ones. 
    "Traditionally, open-air malls, especially strip malls but
even outlet malls, were the poor cousins of big flagship
enclosed malls," said Karl Littler, senior vice president for
public affairs at the Retail Council of Canada. 
    "But now, open-air malls are doing better than enclosed
malls," he said. 
    Ed Sonshine, chief executive of Riocan REIT  REI_u.TO ,
Canada's second-largest property trust, said the company's
suburban shopping centres - all unenclosed and most anchored by
essential businesses like grocery stores - are, in many cases,
doing even better than before the pandemic. 
    Yorkdale shoppers Tamara and her husband Jason will visit
the mall at least once to "see what the mayhem is," they said. 
    "But if I see a line up and have to wait to get into the
store, I'll turn around and go back and buy online," she said. 

 (Reporting by Nichola Saminather in Toronto and Victoria
Waldersee in Lisbon
Additional reporting by Lisa Baertlein in Los Angeles 
Editing by Denny Thomas and Matthew Lewis)
 ((Nichola.Saminather@thomsonreuters.com; +1-416-687-7604;))