Heavyweight retailer Hudson’s Bay has been making headlines in recent days for its inability to pay rent, with landlords taking the company to court for eviction, and according to a commercial broker in Toronto, this could be a sign of things to come.

“I hate to say it, but yes, we could see more of this,” Nicole Attias told CREW. “We didn’t expect the pandemic, or for it to last this long, and this is part of the fallout. It’s a matter of how things will play out because there are too many unknowns right now.”

Attias found the news that Hudson’s Bay wasn’t paying rent surprising because, until now, she’d heard seemingly myriad stories about smaller retail tenants either deferring rent or not paying it at all, but scarcely anything about juggernaut retailers doing the same.

At Centrepoint Mall in North York’s Yonge and Steeles neighbourhood, Hudson’s Bay’s landlord tried having it evicted for not paying rent during the COVID-19 pandemic. In Quebec, a judge recently ordered the company to pay rent to several department stores in the province.

According to PwC’s Emerging Trends in Real Estate 2021 report, the pandemic isn’t the only reason large retailers like Hudson’s Bay are struggling to pay their rents. The trend had already been well underway, thanks to the rise of e-commerce, although there’s nary a question that the pandemic has exacerbated the retail sector’s woes.

“Interviewees are seeing a structural shift in retail, but it is an acceleration of the move toward e-commerce already underway,” said the report. “Several retailers, including big-name brands, have shut their doors permanently or are seeking creditor protection. Enclosed malls have been hit particularly hard, and street retailers in downtown cores like Toronto, Montreal, and Vancouver are seeing less foot traffic because many office towers are still mostly vacant.”

The federal government doled out a rent relief program when the pandemic began, but it has since ended and thrust retailers back into precarious situations. Some have negotiated everything from rent-free periods to rents that are based on a percentage of sales. However, many brick and mortar retailers are worried that the pandemic will have permanently shifted consumer behaviour towards e-commerce, and it’s spurred some outside-of-the-box thinking.

“With some areas of brick-and-mortar retail, like outlet centres, regional malls, and power centres, struggling, there is a strong sense among interviewees that retail properties need to evolve,” said the PwC report. “Malls might convert into residential or mixed-use properties, possibly using some of that space for warehousing, distribution, or fulfilment—including last-mile delivery—to satisfy the growing demand for online shopping.”

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