While the Swedish furniture giant and its familiar blue and white colours will stay put, nearly 170,000 square feet of retail space in the non-Ikea portion of Pinecrest Shopping Centre is going on the block – a move one prominent retail analyst says could pave the way for a new wave of residential development at the site.
Ikea, which owns the entire property, told OBJ the decision to sell off all the commercial space it does not occupy at the west-end plaza is part of its bid to shed assets that aren’t directly related to its retail enterprise.
“We are in a rapidly evolving retail landscape and to ensure we are fit for long-term growth, we are updating some of our real estate portfolio assets to focus on our core business,” Ikea Canada said in an email on Wednesday.
The global furniture conglomerate purchased the 26-acre Pinecrest property on Iris Street in 1993. The mall underwent a major redevelopment in 2011 that saw Ikea relocate to its current site at 2685 Iris St. with an expanded 429,500-square-foot store.
Ikea will continue to own that portion of the property and operate its store. But it is shopping the rest of the site, which includes 168,809 square feet of retail space and an outdoor parking lot with 1,805 stalls.
Ottawa retail expert Barry Nabatian said he’s not surprised the furniture-hawking powerhouse – which operates more than 400 stores around the world and rang up sales of US$45 billion last year – is opting to jettison the mall and surrounding property.
The director of market research at local real estate consulting firm Shore-Tanner and Associates said Pinecrest is a tiny part of Ikea’s holdings in the grand scheme of things, and owning it is probably more hassle than it’s worth for the retailer.
“They don’t want to (be in) the real estate business,” he said, adding that even though the mall is a relatively small asset for Ikea, it’s likely a “huge, huge economic, financial and bookkeeping headache for them.”
Nabatian said Pinecrest’s swath of development-ready land and prime location next to the Queensway and near a future LRT station will make it a prized target for a multitude of potential buyers, including major commercial and residential developers.
The veteran retail analyst said there’s a strong likelihood that whoever takes over the mall will follow in the footsteps of owners of other suburban shopping malls such as Gloucester Centre, Lincoln Fields and Westgate and redevelop the site as a mixed-use project with a residential as well as retail component.
“Its visibility and (highway) access are excellent,” he noted. “Whoever buys it, I think that it would be smart to develop a high-rise apartment tower there.”
"Whoever buys it, I think that it would be smart to develop a high-rise apartment tower there."
Nabatian cited a couple of reasons why the next owner would be wise to look at other ways of squeezing more revenue out of the Iris Street property beyond retail.
He noted that sales at suburban plazas like Pinecrest were in a steady decline even before the pandemic, which has accelerated the trend.
In addition, Nabatian argued the retail complex – which drew about three million visitors in 2019 – is no longer the magnet it once was for consumers from farther-flung suburbs such as Barrhaven and Kanata South, who now have more options to shop in their own backyards.
The mall’s tenants include Quebec-based furniture retailer Maison Corbeil, which took over more than 78,000 square feet of space formerly occupied by Sears in 2021, bedding supply store Linen Chest, arts and home decor chain Michaels, Ottawa-based eco-friendly retailer terra20, Scotiabank and a Milestone’s restaurant.
According to CBRE, which is brokering the sale on Ikea’s behalf, the mall is currently 89.5 per cent leased with a weighted average term of more than 11 years.
Nico Zentil, CBRE Ottawa’s vice-president of capital markets, said he expects the shopping centre to be a sought-after commodity thanks to its blue-chip tenant roster, easy access to the Queensway and proximity to the future Pinecrest LRT station that’s being constructed just a stone’s-throw away across the highway near the intersection of Greenbank Road.
“It’s obviously one of the best-located urban centres in the entire city,” he said. “It’s got significant development upside.”
Ripe for intensification
Zentil said the property has been on the market for a couple of weeks, adding the firm is already seeing “a lot of interest” from potential buyers.
“It checks a lot of boxes – certainly locationally, tenancy-wise as well as the development upside potential that it offers,” he said. “It’s just a real estate 101 play.”
Like Nabatian, Zentil said he believes the property, which is already zoned for mixed-use development, is ripe for intensification with an apartment or condo complex.
“It’s a really good way to kind of maximize the value of the (land) that you occupy,” he explained.
Zentil said the flurry of interest in the Pinecrest property is one more indication that investors across the world are waking up to the city’s many attributes as a haven for capital, including its “stability, predictability and security” in a world rife with geopolitical upheaval.
After a record year in 2021, the local commercial real estate market is poised for another banner performance this year, he added.
“Ottawa … is a market that is gaining a lot of steam in the national context right now for the first time in a while, which is great for the city.”