NATHAN VANDERKLIPPE
CALGARY — From Monday’s Globe and Mail
Last updated on Wednesday, Aug. 19, 2009 02:58AM EDT
In the midst of a recession that has bruised consumers and battered retailers, developers are opening the doors on a massive new project this week in hopes that Albertans’ wallets have not been sewn up by economic worry.
The owners of the $495-million CrossIron Mills shopping centre have, of course, made every effort to mask any hint of financial worry, with a choreographed opening Wednesday that includes appearances by Alberta bright lights such as Kelly Hrudey of Hockey Night in Canada and country music singer Paul Brandt, who will perform a private concert.
But retail specialists across the country are looking to the opening of the cavernous new retail space – a 1.1-million-square-foot behemoth that will expand Calgary’s retail space by 3.5 per cent in one swoop – as a rare chance to see consumer sentiment writ large.
The opening of the mall, Alberta’s first new enclosed shopping space in 20 years, represents the first major roll of the dice by a retail developer in Canada since the financial crisis and recession took root last fall.
How it fares could provide important insights into how Canadian shoppers feel, but also how consumer preference has shifted at a time when conspicuous consumption has become uncool and Gucci offers its buyers branding-free bags to haul home their loot without looking pretentious.
“Are consumers excited enough about a shiny new space?” said David Ian Gray, a retail expert with DIG360 Consulting Ltd. in Vancouver. “It’s going to be exciting to see how many people flow in in the first week. I’ll be watching it pretty closely.”
Some early signs are, however, troubling. Built by Ivanhoe Cambridge, a unit of the Caisse de dépôt et placement du Québec, to hold 17 anchor tenants, CrossIron will open with just 13. It was unable to lease two of the spaces, and then watched as, first, Holt Renfrew pulled back on plans to build a 20,000 square foot space, then Chapters/Indigo said its store won’t be ready for some time.
Two other U.S. retailers – American Eagle and Brooks Brothers – have also pulled back, leaving the mall with empty spaces. Both have told Ivanhoe Cambridge, which built and will manage the mall, that they plan to open some time next year.
But other retailers have stood fast, and the mall says about 80 per cent of its space is leased. Its first anchor tenant, Bass Pro Shops, which opened in March, has already beat its sales forecasts. Still, Alberta retail spending is down – the biggest mall in Calgary, Chinook Centre, saw July sales decline 2 per cent.
The CrossIron retailer pullback has been reminiscent of Ivanhoe Cambridge’s experience with the Vaughan Mills mall in suburban Toronto, a similar project that saw several U.S. retailers pull out ahead of its 2004 opening.
Like Vaughan Mills, CrossIron is located outside city limits, 25 kilometres north of downtown Calgary, with about half its retail space devoted to factory outlet shops.
But comparisons with Vaughan Mills suit CrossIron’s developers just fine, since the Toronto location has done an admirable job of keeping the recession at bay. July traffic has grown by 5.1 per cent, while year-to-date sales are up 10.2 per cent.
That’s not to mention the upside of a down economy: CrossIron has had few problems hiring workers. At a recent job fair, employers opening locations at the mall received 5,000 applications for 3,500 jobs, a shift from the days when Alberta’s retail sector found it difficult to find qualified employees.
“It’s an interesting time to open a centre, but frankly we know these centres do really well,” said Ivanhoe Cambridge vice-president of development John Scott, who admitted it is “unfortunate” that Holt Renfrew is not planning to open in the mall.
“Will we be able to resurrect something? We’re certainly hopeful,” he said.
Still, others say the lack of several promised retailers could hurt the mall, whose best chances at success lie in delivering a unique retail experience. A tough first year could be especially painful, given that malls typically count on a profitable honeymoon period with customers still excited about a new product.
And other retailers could be hurt, too. Not only is CrossIron bringing a deluge of new space onto the market, but Chinook, which is already as big as CrossIron, is building a $280-million, 180,000 square-foot addition.
“Someone’s going to get hurt,” said Graeme Spicer, a Toronto-based retail consultant.
“The retail dollars aren’t going to expand in the same kind of way that the square footage just expanded. It’s going to be the B-level malls that are going to suffer. There’s no doubt about it.”
Still, Mr. Spicer said CrossIron will serve as a “bellwether” on the strength of the Alberta consumer, whose spending force remains a point of confidence for those who track it.
“Even with dropping 10 per cent from where we were last year, we still spend per person more dollars than anywhere else in Canada,” said ATB Financial chief economist Todd Hirsch.
“Alberta is still a great consumer market.”
