Mall landlords likely to get 'creative' to fill Nordstrom vacancies: experts
TORONTO — Nordstrom's departure from Canada's retail landscape will leave significant holes in shopping malls, and some analysts say landlords will need to get creative to fill the space.
If malls want to find similar tenants to Nordstrom, they might look to department store rivals Hudson's Bay, Simons or Saks Fifth Avenue, said Tamara Szames, executive director and industry adviser of Canadian retail at the NPD Group research firm.
But with such companies heavily engaged in the apparel business — the only industry NPD Group tracks that has yet to recover from the COVID-19 pandemic — she thinks it's more likely that Nordstrom's landlords will think outside the box to fill the Seattle department store's spaces.
"Consumers are going back into stores and we've seen they're really looking for an entertainment experience (along with) shopping, so being creative with the leases and rentals of these properties is something that mall owners will have to look at," she said.
She pointed to pop-ups, food properties and experience-based spaces like the World of Barbie — an interactive, ticketed version of Barbie's Dreamhouse at the Square One Shopping Centre in Mississauga, Ont., as potential Nordstrom replacements.
Kate Camenzuli, vice-president of retail at real estate firm CBRE, echoed those sentiments.
"The world is our oyster," she said. "These (landlords) travel globally, to see everything that's available, and so it may be something that we haven't even seen yet in the Canadian market, and that might not be a department store. It may not even be a food hall."
Nordstrom's largest Canadian landlord, Cadillac Fairview, has yet to outline specific plans for the departing chain's spaces, which are often anchor tenants at its malls.
"Cadillac Fairview is constantly assessing the ever-changing retail landscape and while it’s too early to speculate what we will do with these spaces in the future, our team is working diligently to manage this change and work toward an outcome that is in the best interests of our centres and our long-term success," said spokesperson Janine Ramparas, in an email.
Nordstrom's six Canadian stores — CF Chinook Centre in Calgary, CF Rideau Centre in Ottawa, CF Pacific Centre in Vancouver and CF Eaton Centre, Yorkdale Shopping Centre and CF Sherway Gardens in Toronto — have between seven and 10 years remaining on their leases.
Nordstrom Rack, which promised luxury brands at bargain prices, has seven Canadian stores with between five and eight years left on their leases.
Nordstrom intends to shutter both chains' Canadian locations by June, leaving its 2,500 Canadian staff unemployed and hundreds of thousands of square feet of space to fill.
The CF Eaton Centre location alone took over 220,000 square feet over three levels, when it opened in 2018.
Camenzuli expects Nordstrom's landlords to look at each space individually and assess what sort of vibe they're looking to curate at the property.
For some, that could lead to Nordstrom being replaced by another large format retailer or an international brand looking to expand or break into Canada.
In other instances, it will mean the hulking spaces Nordstrom occupies will be broken into smaller stores that can be leased to a wider range of tenants not needing as much space.
Dollarama Inc. and TJX Companies Inc., which owns Winners, HomeSense and Marshalls, have all been looking for space, along with grocers, liquor stores, pet businesses, nail and hair salons and medical offices and clinics, RioCan Real Estate Investment Trust has said in recent quarters.
Many have been eyeing Bed, Bath and Beyond locations, which are due to close because the company has filed for bankruptcy protection.
Asked whether Hudson's Bay or Saks Fifth Avenue would be interested in Nordstrom properties, chief executive Richard Baker said his companies are "optimistic" about their ability to grow market share.
“It is unfortunate for Canadian retail and consumers to lose a high-quality business like Nordstrom," he added, in an email.
Any company looking to expand will find Nordstrom's old digs attractive, said Camenzuli, because the company had prime properties in high-traffic areas.
Even if Nordstrom's landlords were caught off guard by the chain's departure, she said most large real estate companies always have plans for who they want to attract should their tenants depart.
"As much as it's sad to see a Nordstrom player leave, it gives us an opportunity to do things that haven't been done before," she said.
"And all of those teams that now have these opportunities have probably like had all these things in their back pocket that they've been thinking about for months."
This report by The Canadian Press was first published March 3, 2023.
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Tara Deschamps, The Canadian Press