While Colliers’ vacancy rate index for urban locations in Vancouver has gone up to four per cent, the one for suburban areas has fallen to one per cent between mid- and the end of 2022

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Bruce Peters, who has long owned the Zazou Hair Salon with two locations in North Vancouver, is on the hunt for a larger retail space that’s quite different.

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It would be for what he hopes will be an Uber-like business where dozens of beauty professionals rent space and provide their services in one location that is about 6,000 square feet. Ideally, it would be located in an open-air strip mall that has parking and access to transit for customers and the hairdressers, nail technicians and massage therapists, as well as major grocery stores and big-box outlets.

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The idea is to put this Urbana Beauty Village shop in the path of customers who haven’t fully returned to their downtown offices and who are sticking to “businesses of necessity” where they buy food and staples even as they curb their other spending because of inflation and interest rate hikes.

“The big advantage really comes down to cost. We can’t be in a situation where you’re in East Vancouver or Downtown Vancouver where you’re sitting at $100 all-in per square foot. Those numbers don’t work with us,” said Peters. “We need cost-effectiveness.”

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His shift comes as real estate company Colliers is describing a “recalibration” in the retail market. Its newly released retail report pegs a vacancy rate index for suburban locations like the one Peters is looking for as having fallen from 2.3 per cent to one per cent between mid- and the end of 2022.

“It’s really difficult to find that kind of space now,” said Colliers’ executive vice-president Sheldon Scott, who specializes in suburban commercial real estate.

He has been analyzing opportunities for Peters starting in North Van, then Burnaby, Coquitlam, Port Coquitlam, Langley, and will look in South Surrey and Delta.

At the same time, Colliers’ vacancy rate index for urban locations, including Downtown Vancouver and high-street areas, has gone up from 2.6 per cent to four per cent over the same time period. The highest levels of vacancy were found on parts of Alberni Street at 9.57 per cent, Robson Street between Thurlow and Bute at 15.43 per cent, and Gastown at 7.65 per cent.

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These spots also have some of the higher per-square-foot rates ranging from $70 to $240 compared with other high-street locations such as Vancouver’s West End, Yaletown and Mount Pleasant at between $50 and $85 per square foot.

“It was extremely busy last year from January up until August,” said Colliers’ associate vice-president Sherman Scott, who focuses on urban leases. “Then things tapered off.”

He added that even though a four per cent vacancy rate is still a healthy number, return to downtown office numbers haven’t bounced back to what they were before COVID-19. Also, many retail tenants that had been helped by government loans haven’t been able to fully recover.

“A lot of my work in the last six months has been backfilling previous restaurants and gyms that unfortunately didn’t make it through,” said Scott.

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Ironically, many of the new businesses coming in are also restaurants and gyms, but they aren’t saddled with the accumulated debt loads that shut down the previous tenants, he said.

“Hybrid work hasn’t been solved yet by all companies. They are still kind of investigating how it’s going to work for employees. Is it three days or four days and what days?” said Madeleine Nicholls, Colliers’ senior managing director. “I’d say downtown is probably back to 60 per cent of the traffic and the occupancy that it was pre-pandemic.”

Nicholls said that retail spending on big ticket items such as home renovations, garden landscaping and furniture has moved to fashion, cosmetics and personal services such as those for hair and nails. Even if people haven’t fully returned to working in offices, they’re meeting friends and colleagues at restaurants and celebrating occasions together.

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There has been surprising growth in the clothing and fashion sector, with an increase of 27 per cent over last year to date in fashion spending across Canada as sectors such as car dealerships and electronics stores are struggling, according to Colliers.

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