Many Canadian retailers are fighting for space in Canada’s top markets like Edmonton. Some commercial centers, such as the West Edmonton Mall and Calgary’s Chinook Centre have even been reportedly combating each other for brand name tenants.
Attempting to draw big name tenants and offering exclusivity has long been common practice in retail property investment and management, but this may not be the most profitable strategy going forward.
Historically, lower demand for retail space used to dictate that retailers could demand exclusivity in their domain within a shopping centre and landlords would oblige. However, this is quickly changing, especially in markets such as Alberta where retailers are competing with each other to secure floor space.
Big names are desirable, but they can also present issues. For example, well-known retailers may already have an extensive e-commerce presence. This can become a disadvantage, as it can reduce in-store sale performances and additional traffic to the shopping centre.
Furthermore, popular retailers are not always the most profitable tenants due to their negotiating power and prestige. Competing for these tenants gives the larger retailers more negotiating power, thus decreasing the landlord’s profit even further.
In order to combat this, landlords should diversify their tenants. Local and boutique tenants, especially stores revolving around services and food, can prove to be just as profitable as big name tenants.