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As home prices surge, Canada's mall owners turn prime land into condos

In Toronto, RioCan is creating ePlace, a development with about a fifth of the retail space of some of its other malls, 1,100 condominiums and apartments, and some offices.

Reuters  |  Toronto 

House prices surges, Canada's mall owners add condos to shopping centres

Canadian owners are adding condos and apartments to their shopping centers, seeking to capitalise on a supply-constrained housing market while reducing exposure to a struggling sector.

Developers such as REIT, Canada's largest trust, and the units of some Canadian are turning prime land that has historically not been put to best use - such as parking lots or - into housing in one of the world's most expensive, supply-constrained residential markets.

In the greater area, there were 12,500 new homes available to purchase in October, less than half the average between October 2000 and 2015, according to

The rental market is just as tight. has a 1 per cent rental vacancy rate, according to the Mortgage and Housing Corporation. That was despite the highest level of rental construction in 25 years in the third quarter, according to Urbanation Inc.

Home prices have surged more than 60 per cent in and 40 per cent in in the last three years. Even pullbacks in these markets this year following policies to dampen price gains appear to be reversing on continued demand and limited supply.

"The population is growing and there's no real land left in Canada's biggest cities, said "Demand for space isn't growing... it makes perfect sense on so many levels."

In Toronto, is creating ePlace, a development with about a fifth of the space of some of its other malls, 1,100 condominiums and apartments, and some offices.

The 466 rental apartments will add the first of 10,000 residential units the shopping centre developer plans to own by 2025 across 50 properties.

Buyers are responding.

All the condos at ePlace, expected to be completed by early 2019, have already been sold.

Even owners of thriving are joining in.

in is Canada's most productive mall, with C$1,653 ($1,285) of sales per square foot for the year ended June 30, according to a Council of study.

But owner Properties, the real estate unit of the Municipal Employees Retirement System, is seeking to add as many as 1,496 residential units, offices and hotel space under a planned revamp.

is betting that better public transit and technological changes such as autonomous vehicles will reduce demand for parking, said Bradley Jones, at

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Rising vacancies, exacerbated by the demise of Sears and Target Corp's Canadian operations over the past few years, "have caused even more people to start thinking that there are alternate uses for part of their sites," said Matthew Smith, head of national investment at

And, if a concentration of retailers around transport nodes is weighing on businesses despite their location, changing some to residential could reduce that burden, Smith said.

It's not simply about plopping a few apartments on or adjacent to existing malls, however. Owners like (CF), a unit of the Teachers' Pension Plan, have concluded that the traditional mall, anchored by with chain stores and fast-restaurants in between, may no longer be as profitable.

CF plans to spend about C$2 billion to add residential units at four of its malls, in addition to one under construction in Toronto, said Finley McEwen, its

Many of the redevelopments include "turning the inside out," putting specialty stores, sit-down restaurants and other non-traditional occupants facing outward, which, combined with the residential units, create a space that's more alive, McEwen said.

"Mixing uses creates a vibrancy after hours, they create safer streets ... And they become naturally more attractive," he said.

($1 = 1.2861 Canadian dollars)

First Published: Wed, December 20 2017. 02:54 IST
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