Homebound Workers Inject Life into Suburban Malls After Downtowns Empty Out

By Nichola Saminather, Victoria Waldersee
Source: www.reuters.com, November 2020

TORONTO/LISBON (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 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, 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.