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St. Catherine Street: the changing of the guard

 

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Remember that little boutique where you bought the leather jacket 15 years ago? It’s gone. If you have not visited St.Catherine Street in Montreal since the early 1990s, you would not recognize it. Of the stores that were located in the prime area between Bishop and University, not more than fi ve are still in existence. The locallyowned stores are gone, replaced at first by national retail chains, which in turn are giving way to international chains. Storefront retail throughout North America has been in decline for many years. St. Catherine Street is the exception. Rental rates have quadrupled. Vacancies are nonexistent. It is not just any street. Fifteen kilometres long, St. Catherine comprises 1,200 stores, making it the largest concentration of retail outlets in Canada. The street is witness to 3,500 pedestrians per hour, 250,000 offi ce workers at lunchtime, and 100,000 students per day, keeping the street alive at all hours. Furthermore, eight subway stations, 30 kilometres of underground walkways with 178 entrances, and 2,000 underground stores totalling 36 million square feet (sq. ft.) of floor space are used by 500,000 people on a daily basis. In street front retail, if you don’t have a store on St. Catherine Street, you have not made it.

 

There are two strategies for retail chains entering Quebec: 1) open a fl agship store on St. Catherine Street; or 2) open four or five stores in major malls around Montreal, and a flagship store on St. Catherine Street. At the corner of Peel and St. Catherine, three of the four corner stores have changed in the past year. The newcomers are H&M (Hennes & Mauritz of Sweden) with 20,000 sq. ft; Guess with 13,000 sq. ft; and American Eagle, with 17,000 sq. ft and Apple Store. In the last five years, more than 20 flagship stores have opened here, mostly multinationals, such as: Lululemon, Oakley, American Eagle, Esprit, Garage, Guess, Khiels, Geox, GNC, Ecco Shoes, H&M, Mango, French Connection, Quicksilver, Marciano and Adidas.

 

The shortage of space forces stores to take minimal frontage on the ground floor, and more space on the second and third fl oors. Ground fl oor space that leased in the early 1990s for $50 net per sq. ft. (psf ), with the landlord offering $25 per sq. ft. for leasehold improvements, now leases for $200 net psf and up, plus $30 psf for operating costs and taxes. And some of the stores spend $5 million renovating the space. But as they say in Rolls Royce dealerships, if you have to ask the price, you can’t afford it. Some of these stores are not making money, but they are here for image and marketing purposes. All the other banners are here, so they have to be here too. Whereas the mixture of stores constantly evolves, most of the landlords have been here for 30 or 40 years. They have seen the market go up and down. In this market, they will turn down all but the best. For one vacancy last year, there were four multinational chains trying to outbid each other for the space.

 

http://www.avisonyoung.com/library/pdf/National/Fall-Winter_2008_AY_National_Newsletter.pdf

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