What does Canada’s rapid e-commerce growth mean for retail real estate?

E-commerce has kept Canadians spending throughout the COVID-19 pandemic, but at what cost to commercial property owners?

What does Canada’s rapid e-commerce growth mean for retail real estate?

Latest data from Statistics Canada showed that e-commerce flourished in the months following the widespread implementation of COVID-19 mobility restrictions – leading into the likely irreversible transformation of the commercial real estate market.

E-commerce activity reached a record volume of $3.9 billion in May, increasing by 2.3% from April and a staggering 99.3% from February. On a year-over-year basis, the sector grew by 110.8%.

To compare, retail sales shrunk by 17.9% in the February-May time frame. The most acute retail decline was seen in April’s $33.9 billion volume, which was 29.1% down from February and 26.4% down from a year ago.

StatsCan said that the retail sector should brace itself for further tectonic shifts, as a significant portion of tenants might vacate their spaces in the very near future due to operational concerns.

“Small businesses are increasingly turning to e-commerce platforms, and are using these platforms in innovative ways,” StatsCan said.

This mirrored the findings of a recent Colliers International report, which found that around 10% of retail tenants will be shutting down their businesses within the next few months.

“We expect the trend around permanent closures to increase given the slow recovery in consumer demand and limitations created by physical distancing,” said Jane Domenico, senior vice president at Colliers Canada. “COVID-19 is forcing retailers to do business differently.”

Around 74% of retailers said that they are exploring new sales tactics, with 41% considering online operations. Another 47% said that space will become a less pressing need due to a greater focus on teleworking.

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