Pandemic Forces Rethink of Ground-Floor Podium Retail Leasing
by Mario Toneguzzi
The impact of the COVID-19 pandemic on the retail industry is spurring developers and property managers to think differently as to what retail space in condo and office towers might look like in the future.
Arlin Markowitz, executive vice-president/urban retail team with CBRE in Toronto, said COVID is making developers and other real estate stakeholders consider options for how space will best be utilized.
“But, that doesn’t mean necessarily that things are going to change,” he said. “While there has been some pain in the retail market due to COVID, I think anybody with any kind of mid- to long-term vision understands that this is not permanent.
“Whether it’s in six months or a year, people will be back in the office. They will be back working downtown. They’ll be vaccinated and things will get back to normal eventually. So I don’t see people making any extreme changes.”
However, there is at least one area he thinks will almost certainly be impacted: space allocations for eateries and restaurants.
“I think people are rethinking larger space and thinking about how to best include patio space into their potential retail restaurant space. Patios have never been so important and I think that will be a permanent change.
“If you’re going to rent space for a restaurant nowadays, if it doesn’t have a patio it’s so much less attractive. It’s on everybody’s mind . . . but I think the smarter people are taking more of a pause rather than taking drastic changes because they understand it’s not forever.”
Markowitz said retail and retailers are always evolving. He said building owners and managers may look in the future to target more essential-needs retailers into their developments.
“Those types of brands have never looked so attractive. If you can lease space to a grocery store, pharmacy, bank, if you have fast food in a drive-thru environment, that’s always going to be super popular. There are some things where their value and their strength has become amplified,” said Markowitz.
“One thing developers are looking at is flexibility to carve up retail space into more smaller stores rather than bigger stores. I think one of the formats of retail that was hurt in this was large, multi-level space.
“So, the most attractive retail space today is smaller space with patios and after that it’s just going to be smaller ground-floor space. When you start to get this super-large, two-level space, that’s the stuff that’s most challenging in this environment.”