Vancouver 2050: Where the city and province’s commercial and real estate markets are headed

A network of high-density shopping-mall villages slash town centres—neo-downtowns complete with apartments, hotels, art galleries, public plazas, offices, pop-up stores and community festivals—are studded across the landscape, all connected by Metro Vancouver’s octopus-armed SkyTrain system.

Workplaces have been reimagined throughout the region in the aftermath of, first, the pandemic, then, second, the giant push to seduce employees away from their pyjamas and home offices. The snazziest of these office buildings have attached wellness centres, party patios, dog parks, grocery stores. Business parks have added in cool coffee shops and fitness spaces.  Surrey, New Westminster, Burnaby and North Vancouver, after a slowdown during the high-interest-rate-induced recession of the 2020s, have developed intense new office districts that are wildly popular with the thousands of suburban employees that prefer them to the downtown commute.

Apartments that are in mixed-use developments have mushroomed along SkyTrain and RapidBus lines, thanks to the provincial housing legislation that opened the floodgates. That means lots of new clusters and rows of shopping spots—some carefully curated mini-high streets, others more precarious and less centrally managed strings of rotating businesses aimed at cashing in on the quick-serve needs of transit users. Elsewhere, the luxury-shopping world is dominated by two poles: Downtown Vancouver and the new universe at Oakridge Park.

Surrounding all of that are the increasingly varied, high-tech industrial buildings to service the new people and shops and offices. There are gigantic warehouses for transloading containers from the port. Industrial owners have developed ever more sophisticated plans for multi-storey industrial buildings in the region’s ongoing effort to max out the limited supply of industrial-zoned land. New industrial parks have a mix of small and big spaces that can host both startup operations that are making the leap from a backyard garage and more established manufacturing and biotech big-foots. Other cities, like Maple Ridge, have been newly developed in the constant hunt for industrial space in a  perpetually land-squeezed region.

All of that is where metropolitan Vancouver is potentially headed in the next two decades, as urban life gets re-organized once again in the wake of multiple shocks and explosive accelerations of specific trends. Among them: pandemic isolation and its rebound effects (must travel! buy stuff! experience everything!), the emergence of “omnichannel” shopping, the fraught tussle over where everyone is going to work and the current provincial government’s drive to massively increase housing density in major cities. Hovering over the landscape at the moment is the storm cloud of the highest interest rates and construction costs to be seen in 20 years.

But Vancouver is likely to be ahead of or quite different from many other cities in its new incarnation, because of the particular characteristics that shape life and land use here: a tightly constricted land base; a well-thought-out and functional rapid-transit system; and big influxes of tourists, students and immigrants from all over Asia.

“Vancouver is setting the standard for what retail, and in particular malls, can be in North America,” says Vancouver-based Ian Thomas, who spent four decades as an international retail consultant. “There are at least 12 malls being repurposed, and a lot of it is related to the LRT. That’s why Vancouver is having this amazing success.”

Vancouver mall owners are taking the ideas popularized by Los Angeles developer Rick Caruso a quarter-century ago and hyper-driving them. Caruso believed that malls could become the new town centres, the modern crucibles for thriving urban life. He worked primarily in California, so that meant most of his village-centre malls (The Grove in L.A.’s Fairfax district is probably the best-known to British Columbians) still require a lot of vehicle miles travelled by customers. In Metro Vancouver, the transit connections—a vastly different picture from struggling malls in the U.S. that are isolated at the intersections of giant freeways and are unlikely candidates for urban-style densification—help take malls to a new 4.0 or 5.0 stage from their first iterations in the 1960s.

That’s the big and somewhat utopian picture. Within it, there are dozens of larger and smaller transformational shoots sprouting, some of which will grow and blossom while others may wither after a brief spurt.

Trend #1

In-person shopping came back, baby.  But online didn’t go away. We’re living in the “omnichannel” world of consumption now.

It’s not unique to Vancouver, but shops with stuff in them are on the rebound. Yes, online shopping is still increasing at a higher percentage but that’s because it’s a smaller base. (When online shopping boomed at the start of the pandemic, it went from a 3.9 percent share of total retail to 6.2 percent in 2022.) But what people in the retail universe are seeing is something they call omnichannel shopping: People are buying things every which way. They shop in malls and on main streets. They buy in person and online. They go to giant big-box discounters and they patronize small independents.

Both Canadian and American analysts and stats-gathering agencies have documented the rebound of in-store spending over the past year as people rediscovered the benefits of looking at the physical thing in a shop instead of on a screen from an online catalogue. “The retail sector surprisingly is making fairly strong headway,” says Thomas. “With the frustration of returning merchandise and the anguish you can go through, a lot of people are rushing back to touch and feel. Malls have responded, made themselves more open.”

Amy Robinson, the executive director of LOCO BC, a nonprofit that focuses on small-business issues, agrees that in-person shopping is seeing a comeback, especially here. “B.C. consumers emphasize more seeing the product in person,” she says. A survey by the Canadian Federation of Independent Business this year found that people in B.C. and Saskatchewan are the most likely of all Canadians to shop at a local store—only about one in five, still, but certainly better than the tiny 7 percent of Albertans in that category.

There’s a cloud, though. Many small retailers are thinking of throwing in the towel, says Robinson. They can’t find labour, inflation has been a killer, many of them owe money on their pandemic loans, and commercial leases continue to be mind-bogglingly expensive as tenants are required to cover the property taxes on buildings where assessed value is pegged to development potential.

If that incipient trend swells, it could mean a kind of mass extinction of small retail in the region. So what happens in the next 30 years will depend on what different levels of government, along with the private sector, do to sustain them. In the ideal 2050, cities have found ways to ensure a place for small, local businesses by creating new policies to support them: tax relief, requirements for suitable spaces built into new developments, more public messaging about their important role. And private developers could help by finding more ways to include small, local businesses in their projects—something Robinson says is starting to happen (see Trend 3).

Trend #2

Mall villages became the new centres of gravity in metro Vancouver.

Richmond Centre was a typical suburban mall for decades: an airport-sized rectangular box with The Bay at one end, surrounded by Gobi Desert fields of parking that lined No. 3 Road to the east and Minoru Boulevard to the west. Go past it now and the site, the same size as Oakridge in Vancouver at almost 11 hectares, looks like a new city in the making. There are 1,100 apartments in several towers under construction on the west side in the first phase of redevelopment. And Cadillac Fairview (pg. 14), the powerhouse real-estate empire owned by the Ontario Teachers’ Pension Fund, is reimagining the mall as a different kind of place.

“We believe strongly that all our developments need to have a town centre, a significant area that brings together all the elements,” says Brian Salpeter, senior vice-president, development, at CF, as it calls itself these days. “And we will always look for a designed public plaza that is an amenity for everyone: farmers markets, art shows.”

It’s an approach the organization, which owns Pacific Centre Mall and a number of other top-producing malls across Canada, has found pays off. CF’s Carrefour Laval, in Quebec, has a lush garden that has turned into its own attraction, popular for wedding photos or just sitting and breathing. “We look to replicate that,” says Salpeter.

As part of that, the mix of activities inside the new mall village is changing. So far, no mall in Vancouver has incorporated as much as Washington’s Bellevue Square, seen as the utopian ideal, with its high-end hotels and the Bellevue Arts Center built right in. But, still, things are different. Mall operators are now interested in independent businesses in a way they never were before. Now, instead of the endless rows of chain stores that made every mall in North America seem like endlessly replicating clones—Gap, the Disney Store, Fairweather, Sport Chek, Claire’s, Sephora, Old Navy, Foot Locker, Victoria’s Secret, Club Monaco—there are now new arrivals mixed in. At Brentwood, a former middle-brow mall in Burnaby being redeveloped into a massive mix of residential towers surrounding a plaza and outdoor street, there are outfits like Small Victory, a café and bakery chain with only four locations total, and Bella Gelateria, another small, local chain of premium ice-cream makers, both present among larger chains H&M and Nike and one-offs like Hygge Design House.

Trend #3

Shops got smaller, but owners now do more with them. Retailers on city streets have persisted.  And everyone got more creative about how they  run their businesses.

It’s not just malls that are re-thinking themselves. Business operators who have surfed the tumultuous waves of retail ups and downs for decades are developing a new way of doing things: hosting multiple businesses out of a single storefront.

To the naked eye, Briers Home Furnishings on Fourth Avenue looks like one more upscale home decor shop, with a lot of unique pieces and a modernist-eco vibe. But selling sofas, lamps and knickknacks is just the start of what Dave Issar is doing. There’s the shop, which is also online, of course, and there are a lot of lovely things in the not-that-big space. “But the store is just our brand,” says Issar, who has run Briers for 27 years alongside wife Cherie Schuman. Issar, who has retail in his blood (his family ran Carat Jewellers in Vancouver for decades; he operated Bobby Dazzlers stores in Ontario for years) has multiple other revenue streams going on. The company consults developers on home builds. They do staging for real-estate sales. They help design restaurants and offices. They have a decorating business.

That kind of multi-purposing and maximizing of a small space is going to become more prevalent, say industry observers. “Retail won’t be massive big malls anymore. It’s too risky,” says Michael Penalosa, a renowned Vancouver retail consultant. Instead, there will be a variety of small, distinctive shops clustered together.

Grocery stores will continue to expand but “the trend for retailers in general is to shrink and develop synergies with mixed-use developments,” says Adrian Beruschi, senior vice-president at CBRE Limited. That appears to be the plan for the giant former Nordstrom, former Sears, former Eaton’s department store at Vancouver’s central downtown intersection. Official announcements haven’t been made yet, but Cadillac Fairview VP Salpeter says there’s no way the 220,000-square-foot space will be just one department store again. “It’s certain there is not one retailer that is going to take that space.”

And guess what that all means elsewhere? Big-box stores, maybe not so much.

Trend #4

Office life has been regularly recalibrated now for 30 years and… things look different.

Six hundred people were out last December 12 for the “jingle and mingle” party on the plaza in front of the cluster of Bentall Centre towers at Dunsmuir and Burrard in Downtown Vancouver. During the summer, another 600 showed up for a weekend party to celebrate dogs at Bentall’s “bark park”—parking garage turned dog park—a few months earlier. The area also has food trucks regularly parked in front of the office buildings, musicians playing on the plaza and outfits like Lee’s Donuts coming in for pop-up sales (and eventually turning into a tenant). The complex has partnered with Public Disco and the Vancouver Mural Festival.

That’s all the result of intensive work by Hudson Pacific Properties, a West Coast-focused real-estate group that runs places like the Ferry Building in San Francisco and Sunset Las Palmas Studios in Hollywood. The company’s goal: make office life desirable again by creating a sense of fun, interesting activity around it, as well as creating new spaces that serve some not-strictly-office needs like cool rentable party/meeting spaces or wellness centres.

“The office sector is going to learn a lot from what happened in retail,” says Chuck We, Hudson Pacific’s executive vice-president in Vancouver. He doesn’t think this is a short-term trend just to get employees back to the office after the height of the pandemic. “We feel like it’s a permanent change. It’s now a piece of running an office building and making an environment that is better for everyone.” Bentall is 90-percent leased in the current tough office situation as a result.

Not everyone is putting that level of effort into activations, but it’s evident with many new work buildings that it’s not good enough anymore just to provide big empty floors of office space and make sure the elevators and toilets are running okay. At The Post (Vancouver’s former central post office, now slated to become the major Amazon hub), there’s a grocery store, a food hall, a gym. At smaller new offices, there’s invariably a restaurant and/or cool café. “Those would have been banks a generation ago,” says We. Even suburban business parks are putting in coffee shops or advertising walking trails on their properties.

This new thinking extends to office interiors. At Heritage Office Furnishings (a wildly out-of-date name that doesn’t at all reflect the company’s current 21st-century adventures in office design), staff are busy helping employers reimagine their workspaces and come up with consistent policies (for everyone, managers included) on working from home vs. in the office.

Employers are pushing to get their staff back to the workplace, in part to help build up the kind of team trust that simply doesn’t thrive on Zoom. So how to get them there?

“We’re looking at how to give people choice and control,” says Mike Meyer, vice-president of sales at Heritage, whose teams have put different kinds of office design on display at a pop-up space downtown to show off the possibilities. Giving choice means coming up with a variety of office environments with different levels of privacy, of loud versus quiet, of dark versus light, of group versus individual places to work. It turns out people are willing to come to the office more often if they have a dedicated desk. If that is financially or physically impossible, having some certainty—a locker, a booking system—can help replace that.

In spite of those efforts, the map of office work is going to change overall in the region. At the massive Real Estate Strategy & Leasing conference in Vancouver last fall, there was a lot of talk about the uncertainty of the office market and the likelihood of changes. CBRE Limited chair Paul Morassutti said “the office sector is the most vulnerable” of all the types of property out there. “Many lenders are avoiding office altogether.”

So far, Vancouver has not seen anything like the dire collapses of office value that a few American cities have. It has one of the highest return-to-work rates in the country and its downtown vacancy rate, at not quite 12 percent, is the second-lowest on the continent after Toronto. The region’s overall vacancy rate, 9.6 percent, is also relatively sparkling. It hasn’t seen anything yet like what happened in Los Angeles recently, where an office building sold for 52 percent less than it had been bought for five years earlier. Two notable towers in Vancouver were put up for sale in July last year and many analysts said their selling price would give an indication of what’s in store for the city’s office market in general and its downtown office picture in particular. But so far, no news of a purchase price.

At the moment, office development has slowed in the suburbs that had been trying to develop mini-business districts—Surrey, City of North Vancouver, Burnaby, New Westminster. In Surrey, the Century Group has switched 129,000 square feet of planned office space to rental in a four-tower project on the books. “We had some space pre-leased but there were six projects chasing two tenants. As much as we wanted to do it, it was not possible to finance it,” says Bob Ransford, vice-president of development at the company. But few think that’s going to last. As more and more office workers, plus founders and managers, choose cheaper places to live in the suburbs, having offices close to where they live will also be an incentive for reducing the work-from-home rate. “I see the day when Surrey will be a robust market,” says Ransford. “That’s where the employees are. But it’s hard to compete right now when there’s high vacancy downtown.”

Trend #5

Industrial properties have been a gold mine for Vancouver companies and their owners are still the happiest in the region.

World calamities, massive changes in shopping or office work, rising gas prices—in general, great news in recent years for owners of industrial property. Fuel costs skyrocketing? Then there’s more demand to build and store goods on industrial properties as close to urban centres as possible. Online shopping increases? Supply chains wobbling internationally? More need for storage and distribution space. People buying more stuff? Demand for manufacturing space increases.

In spite of that, even the industrial-property world in Vancouver has seen a recent slowdown. It’s far from a crash. It mainly means vacancy rates have increased from near zero to a high of, gasp, 1.2 percent. But the industrial set are not quite as blissful as they used to be. Owners say that, where they used to have four tenants competing for each space that became available, now there are four spaces for each tenant.

Biotech and the region’s bigger fashion companies, like Lululemon and Aritzia, are still expanding. A giant new Lululemon distribution centre in Delta—370,000 square feet built by Wesgroup Properties—is one of the recent additions to the landscape. But fewer small- and medium-sized businesses have expanded or stayed in business as high interest rates wreak havoc on the economy and once-flush consumers reach the end of their pandemic savings. “It’s the end of the binge from the COVID break. The volumes are down 20 percent from last year,” says Marko Dekovic, vice-president of public affairs at Global Container Terminals. “And it won’t get to 2019 levels until 2027.”

But that is helping everyone catch their breath.

“It was a great time, but it was an unhealthy market. There was a real run-up in prices and a real decline in vacancy,” says Jean Batie, senior director of leasing at Wesgroup Properties. The steadily increasing lease rates did solve one problem that other sectors have not been able to cope with as well, which is the jump in interest rates and construction costs over the last couple of years.

Wesgroup is one of the latest to try out the new concept of multi-storey industrial with a Coquitlam project, as people try to work their way around the region’s industrial-land shortage. “It’s a new product and we’re excited,” says Batie. Companies like Wesgroup have also had to gear up to new demands in the industrial sector: much higher ceilings (up to 40 feet) with huge new power requirements. They’re putting them in, though, these days, they’re not necessarily getting higher rents for them. But it is helping them land what they call the “golden geese”—the big distribution centres.

Trend #6

Downtown will fight off decline.

The pandemic brought out a new breed of anti-urbanists—those who think downtowns have become public disorder cesspools and are doomed to die. And they almost revel in it, delighting in every report of smashed windows or stolen merchandise. But as troubled as some downtowns are, particularly in the U.S., Vancouver is in a different place.

Canadian retail expert Craig Patterson believes that Downtown Vancouver’s luxury is going to have to compete in the future with Oakridge Park, which has nailed down several high-end retailers for the eventual date when its mall re-opens—companies that want a mall specifically designed to provide a clear signal that you’re in pretend-Versailles-land. “Luxury brands don’t want to go to malls downtown. They want high ceilings and grand facades,” said Patterson, who runs the online news­letter Retail Insider. “I think Oakridge will split the market.”

But many others say that Downtown Vancouver is and will remain healthier than many other areas for reasons singular to this city. “Vancouver is specifically different from other downtowns. It has a large residential community. It is lively and walkable. All the major attractions are focused downtown,” says Penalosa. The central business district might lose some office workers. But the many residents, shoppers, tourists, sports and concert fans and cruise-ship passengers will remain.

Hotel builders, who are on a roll currently in Downtown Vancouver, with almost a dozen projects in the works from Chinatown to Robson Street, will add more oomph to the area’s gravitational pull.

The downtown district, it appears, still attracts the young and optimistic. Salman Zaidi and his brother, Sahan, carrying on with a family business from Pakistan, just opened a leather shop, Zaidi, in Vancouver’s downtown. They saw that there were big brand-name—and very expensive—stores selling leather in the city, but nothing like what they knew they could produce in stylish jackets and bags. They tried to get into malls but were told the wait lists were up to five years. So they opened on West Pender just a month before Christmas, sourcing leather from Italy and Japan, with a workshop and warehouse in Montreal.

It wasn’t easy to get started. “Because of the rent, it’s so expensive here. A lot of small business owners are afraid to have a storefront,” says 26-year-old Salman. “And the banks—they don’t want to risk their money with small businesses.”

But they got it open and the response has been “fantastic,” he says—both from customers and from their neighbours. One business sends them a pizza every day. Some shoppers have already become regulars. “It will take some time to build up the trust,” says Salman, “but we are trying our best.” He hopes that, in the Vancouver of 2050, he and his brother will still be here, owners of a long-established city business, helping make Vancouver’s downtown an interesting and friendly place.