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The lowdown on downtown vacancy rates: Chicken Little need not apply

Whenever a vacant storefront pops up downtown, there is a natural inclination to ask “is the downtown healthy?” Sometimes this veers into a knee-jerk Chicken-Little-sky-is-falling kind of narrative.

So what’s the lowdown on the downtown? I recently reached out to the Burlington Economic Development Corporation (BEDC) to get some data to provide an objective perspective on key indicators of economic health city-wide, to compare that to our experience downtown.

The good news is that Chicken Little need not apply: based on the data, the downtown is healthy, with vacancy rates that mirror and in some sectors are lower than those across Burlington. This is in spite of the fact that the downtown faces some unique challenges, detailed below.

What we’ve learned

The BEDC provides a wealth of information via their Data Centre. The Economic Indicators section provides this snapshot of vacancy rates (alongside many other indicators):

  • commercial vacancy rates hover at 24.2%
  • industrial rates are 4.6%

The downtown business composition is roughly 30% commercial (professional sectors) and 70% retail (combining retail/service/restaurant) as follows, with no industrial members:

  • 34% professional sector
  • 36% service sector
  • 15% restaurants, eateries and other members of the hospitality sector
  • 15% retailers

According to BEDC, it has been a challenge to get retail-only vacancy rates. These rates are not published by the major brokerages. In the past, brokerages have cited difficulty in tracking a reliable number. As of 2014, the Urbanmetrics study identified that Burlington has 10.6 million square feet of retail and service space and that the vacancy rate was 5% at that time. The study is located here: Urbanmetrics Commercial Strategy Study

BEDC estimates that number is still roughly accurate.
Based on 2014 information for retail, and the latest office and industrial numbers, the overall city vacancy rate can be calculated at 4.26%, as follows:
The city average is significantly reduced by the low industrial vacancy rate; the vacancy rate would be much higher if the industrial rate is removed. The commercial/retail only rate would reflect a more accurate comparison to the downtown, given there are no industrial businesses in the downtown. But even when using the overall average vacancy rate of 4.26% and 5% for retail, downtown is essentially the same as the rest of the city.
Downtown Burlington has an estimated vacancy rate of 5%, based on information provided to the Burlington Downtown Business Association Annual General Meeting. And the BDBA has seen an increase in members in the restaurant, professional and personal service sectors, per below:

Competitive turnover rates

The downtown is also holding our own on business turnover rates, another indicator of economic health. A “churn” or turnover rate of 15-20% is a red flag, according to industry benchmarks. The downtown’s 2016 churn rate was 8%, the lowest it’s been in eight years, based on information provided at the BDBA AGM. We’re doing just fine, given an intensely competitive and ever-changing retail market.
Some additional facts to consider: according to the BDBA’s business recruitment specialist, who has extensive experience and connections with major retail operators, some turnover and vacancy is healthy, as it allows new and emerging businesses to join the business family in a particular location. Consider the turnover at the MapleView Mall, and new anchor-brand businesses that have been attracted, transforming the mall into a regional destination. Consider the vacancies at the Burlington Mall, which have led to major new investment and business attraction coming this fall. The downtown competes with both locations, as well as stand-alone big box stores and Power Centre formats.
Significant competition is also coming from online sales and distribution powerhouses like Amazon. At least one business I know of closed its storefront downtown because online sales were booming.
On the office/commercial side, the landscape is changing with co-working spaces, telecommuting and “work from home” trends, to name a few. I can attest that I am frequently out of the office and have even offered my space as a meeting room, preferring to work instead in the community with the help of mobile devices and paperless filing that keeps me connected to everything I need with the touch of a few buttons.

Unique Conditions

So, downtown has turnover rates within healthy margins, and vacancy rates at or below (in the commercial sector) the rest of the city, a remarkable achievement given some unique conditions facing our business family:
  • paid parking: downtown businesses don’t have to provide on-site parking, in order to preserve the walkable, small-town appeal of our storefronts, close to the street. Instead, businesses pay into a parking levy to provide shared municipal parking, onstreet, in city lots and in the garage. The Burlington Downtown Business Association paid for 1/3 of the garage construction, with the balance paid by parking rates and fees, and a city contribution (the city receives ongoing rent revenue from tenants of the parking garage street-level and second floor commercial space). Many downtown businesses do have onsite parking, but receive no discount to the levy. Some businesses also pay for monthly permits for themselves or employees. So, downtown businesses can pay up to four times for parking: 1- through the levy; 2- to maintain their own onsite parking; 3-through monthly permits for employees; and 4- through general taxes when a new structure is built.
  • development: downtown redevelopment has created both pros and cons for downtown businesses; more (potential) customers, but also sharply escalating land values due to land assembly and price speculation for development, forced relocation when a site is redeveloped, and difficulty in some cases getting long term leases due to planned redevelopment. All these factors contribute to vacancy rates and churn. Overdevelopment in height and density only magnifies these challenges, which is why sticking closely to the Official Plan and Zoning is so important. It’s also critical to attract a variety of housing types with redevelopment, to attract a healthy mix of new residents (recently we’ve seen one highrise format built, that mainly appeals to empty-nesters who often leave town during the winter months; we also want to attract more youth and families to live downtown,). And we need commercial redevelopment, not just residential, so people can both live and work downtown, providing year-round, feet-on-the street.
  • Business Improvement Area levy: On top of the usual costs of doing business, downtown businesses pay a levy to the Burlington Downtown Business Association – mind you, they get great value in return, which I’ve seen up close as the council representative on the BDBA. Member benefits include: beautification (flowers/Christmas lights); numerous events to bring customers downtown, either direct-delivered or offered in partnership with others; member networking and mentoring, sharing expertise to keep every business thriving; advocacy to City Hall on policies, development and other issues affecting the downtown community; and a business recruitment specialist to attract new businesses to the core, just to name a few benefits.

Downtown (like the rest of the city) will always be in a state of change, which, if managed with purpose and care, will keep downtown healthy and vibrant now and for the future.

 

I was inspired to seek public office because I believe, like so many of you, “I can do something about that” on the issues we face. As councilor, my role is to take a stand on what’s best for residents and go to bat for it. Pushback is inevitable from those who don’t have the community’s interests at heart. I will stand with you and for you, to achieve the best interests of our city, without caving to unacceptable compromise in the name of consensus.

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  1. Great article. Is some of the concern more optical than actual? I see in other cities huge vacancy rates in downtown areas, with landlords making it virtually impossible to rent, and few incentives to stop that behaviour. It would be interesting to see compariaons in municipal policies and how they contribute to vibrancy vs vacuums.

    • What I can tell you is that other BIAs have sought out advice from the BDBA because we are seen as successful and an industry leader. BDBA has also won industry awards including some with cash value which has been put back into the downtown.

  2. Stop the walkable rhetoric – yes, I live downtown, and yes, I can walk to the core. Yes, I patronize the businesses in the core: However, No one I know that lives outside the core (North of the QEW in particular) has any desire to come downtown.

    • Larry, You will be pleasantly surprised when we release the results of our Free P! in December survey. Close to 500 respondents so far, and half of them say the live and work outside the downtown but “visit regularly.” Watch for summary results in September when the survey closes.

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