'Not saying there's not a future for retail, but it has to be a right sized future': Render

Hudson’s Bay Vacancies & Real Estate Repurposing

Key Concepts:

• Repurposing/Adaptive Reuse: Converting existing buildings for new uses, particularly in response to changing market demands.
• Right-Sized Retail: Adjusting retail spaces to be smaller and more focused, reflecting current consumer habits.
• Demand Analysis: Identifying current and future market needs to inform repurposing strategies.
• Long-Term Value Maximization: Planning for future development and densification to increase property value.
• Absorption Rate: The rate at which available real estate is sold or leased.

The Challenge of Vacant Hudson’s Bay Properties

The interview focuses on the challenges faced by landlords following the bankruptcy of Hudson’s Bay nearly a year ago, specifically regarding the large vacant spaces – averaging around 200,000 square feet – left behind in their former properties. Dwayne Render, City Studio Director and Senior Associate at Gendler, explains that relying on traditional large department stores to reoccupy these spaces is unrealistic. He emphasizes the need for a “right-sized future for retail,” acknowledging that retail still has a place but must adapt to current market conditions.

Identifying Alternative Uses & Demand Analysis

The core argument presented is that landlords must actively explore alternative uses for these spaces beyond traditional retail. Render stresses the importance of understanding market demand and how that demand aligns with the existing property’s characteristics and potential for future development. He highlights the need to “dig into the numbers, dig into the data, the demand, and then marry that up to the existing building and the existing uses.”

Potential Repurposing Scenarios

Several potential repurposing scenarios are discussed:

• Housing: While acknowledging the demand for housing, Render points out the challenge of financial viability and affordability.
• Data Centers: The booming data center industry presents a potential opportunity, particularly for the deeper, less exterior-facing portions of the buildings, though power demands are a key consideration.
• Community Hubs: The possibility of transforming these spaces into multi-use community hubs is suggested, incorporating retail at street level to enhance vibrancy, safety, and property value.
• Densification: Long-term strategies include densifying the sites by adding office spaces, hotels, or other uses to meet evolving market demands. This requires proactive planning and preparation.

A Phased Approach to Repurposing

Render outlines a two-phased approach to repurposing:

1. Immediate Return: Identify uses that will provide the best financial return today and are compatible with the existing building structure.
2. Future-Proofing: Project absorption rates and demand for various uses over several years. Prepare for potential future uses (office, residential, hotel) by making provisions within the property, even without a definitive commitment. He states, “you don’t have none of us have a have a crystal ball…we can muse and we can prepare.”

Real-World Examples & Case Studies

Render provides two examples of successful repurposing projects undertaken by Gendler:

• Eaton Centre: A portion of a vacated Eaton Centre space was converted into office space occupied by Beimo.
• Nordstrom: Following Nordstrom’s departure, Gendler “right-sized” the space, introducing Simons and Italy as tenants. This demonstrates a strategy of adapting to market needs and introducing new uses over time.

The Importance of Street-Level Activation

Render emphasizes the importance of activating street level with retail or other uses to improve safety, enhance property value, and contribute to the overall vibrancy of the city. He notes that this “impacts…safety, impacts value and all sorts of…different city level characteristics.”

Notable Quote:

“The options are endless but one needs to be realistic in targeting the correct uses and the correct uses or the answer at least for targeting the correct uses comes out of understanding what is needed in the market and then marrying that with the property.” – Dwayne Render.

Technical Terms:

• Absorption Rate: The rate at which available real estate is sold or leased. A high absorption rate indicates strong demand.
• Adaptive Reuse: The process of repurposing existing buildings for new uses, often involving significant modifications.
• Densification: Increasing the population density of an area, often through the construction of taller buildings or the addition of new units to existing structures.

Logical Connections:

The interview follows a logical progression, starting with the problem (vacant Hudson’s Bay spaces), then moving to the core argument (the need for repurposing), exploring potential solutions (various alternative uses), outlining a strategic approach (phased implementation), and providing supporting evidence (case studies). The discussion consistently links market demand to property potential, emphasizing the importance of data-driven decision-making.

Synthesis/Conclusion:

The main takeaway is that landlords facing large vacancies due to the decline of traditional department stores must proactively embrace repurposing strategies. Success hinges on a thorough understanding of current and future market demands, a realistic assessment of property potential, and a phased approach that prioritizes both immediate returns and long-term value maximization. Thinking “outside the box” is essential, but must be grounded in data and financial viability. The examples provided demonstrate that successful repurposing is achievable and can revitalize both individual properties and the surrounding urban environment.