Even though big projects are beckoning, many real estate developers in Western Canadian will focus on smaller pursuits in 2006 - strip malls.

In Greater Vancouver, approximately three million sq. ft. of new or redeveloped strip mall space is planned or under construction, while Calgary has two million sq. ft. in the works and Edmonton will produce 1.5 million sq. ft., says Blake Hudema, president and CEO of Vancouver-based Hudema Consulting Group Ltd., which helps developers and retailers produce new and redeveloped premises.

Strip malls are straight stretches of no-frills, car-friendly commercial properties that often contain numerous tenants and face busy streets.

The strong activity will continue, he says, as many Olympic-related megaprojects such as the Sea-to-Sky Highway expansion, 2010 Winter Games venues and the RAV (Richmond-Airport-Vancouver) rapid transit line begin to ramp up in Vancouver and developers hedge their investments on the retail phenomenon known as the power centre, which consists of 10 to 12 big-box stores on one property.

Wayne Chose, Business Edge
Retail consultant Blake Hudema at the downsized and redeveloped Champlain Square.

"The small (strip malls) are there, really, forever, because they serve a definite utilitarian food and convenience role," says Hudema, referring to retail properties under 200,000 sq. ft.

Consequently, mid-range facilities between 200,000 and 300,000 sq. ft. that once held stores such as K-Mart are "dinosaurs," adds Hudema, who has helped build McKenzie Towne in southeast Calgary and redevelop Victoria's Hillside shopping centres, among other projects, in recent years.

Champlain Square, formerly known as Champlain Mall, at 54th Avenue and Kerr Street on Vancouver's east side, is a perfect example of a mid-sized centre that has been reborn on a much smaller scale, says Hudema, who was not involved in the redevelopment.

Large retailers such as The Bay and former SuperValu grocery chain have moved out, the property has been downsized and numerous condos now stand on former mall property.

When it comes to retail development in Greater Vancouver, says Hudema, strip malls are by far the leaders, both in square footage and the number of facilities under construction.

"There's two distinct opportunities," says Hudema, whose firm acts as a fee-for-service management consultant to developers and retailers across Western Canada.

"One is redevelopment if you're talking about established urban areas - Vancouver, Burnaby, New Westminster, North Vancouver - and then it's new shopping centres if you're in Maple Ridge, Surrey, Langley."

He estimates 70 per cent of Lower Mainland strip mall projects are redevelopments and 30 per cent are new. In the more suburban centres, it's the opposite case with 70 per cent new and 30 per cent redeveloped.

"(Vancouver) had some of the first shopping centres out there," says Hudema. "The land has become more valuable, so it makes sense to redevelop them."

In smaller B.C. communities such as Kelowna and Kamloops, the trend is toward new facilities.

Calgary and Edmonton are more like smaller B.C. communities, with more new neighbourhood shopping centres than redeveloped ones.

"The land value difference between (Calgary's) established areas and new urban areas isn't as big as it is in Vancouver," says Hudema.

"Land values in the inner part of Calgary are probably not as big as they are here."

With its housing sector booming, Calgary has also developed many new neighbourhoods - as a result of new subdivisions - that require strip mall-type facilities.

"The Edmonton pattern and the Calgary pattern are almost identical," says Hudema.

When it comes to choosing development options, strip malls can get the most players because small companies are more able to get into strip malls than large shopping centres.

"They're quick to get into and quick to get out of, so you can reduce your risk," says Hudema.

Institutional investors are also leaning toward strip malls because, although the return is not as great as it would be with a larger mall, the risk is lower, so they're willing to accept smaller but steadier revenues.

Brent Sawchyn, principal and senior vice-president of development for Vancouver-based Anthem Properties Group, a mixed-use property development company, says strip malls are contributing to a retail real estate revival.

Retail properties appeal to developers and investors because they provide ongoing revenue streams, whereas "if you build a condo, once it's sold - it's gone," says Sawchyn. Housing developers must also deal with booms and busts that don't apply to retail because ongoing leases outperform one-time sales.

"(Housing developers) are building a lot of houses in Langley and Abbotsford, but that (trend) is going to end sometime," says Sawchyn, who has been working in retail development for 18 years.

In some areas, strip malls have given way to power centres - facilities that can take up large areas of land but often contain a smaller number of big-box stores.

Sawchyn suggests strip malls are taking longer to develop than they used to.

"Strip malls still occur - just not as quickly as they used to," he says.

While some nearby residents have objected to strip mall development, local governments have often supported their construction during slower economic times.

"Now, you're seeing councils and municipalities more resistant to them because they've got all this activity in all forms of development," says Sawchyn.

Retail projects that used to take six to nine months to obtain building permits now take a year.

Retail developers are also having difficulties finding existing places and new open spaces where they can set up their shops.

"We're spending a lot of time in places like Calgary, where we're trying to bring the Vancouver experience - mixed-use development," says Sawchyn.

That means retail facilities are being built below residential and office towers. But developers face intense competition for skilled trades workers with megaprojects such as Olympic venues in Vancouver and oilsands projects in northern Alberta.

The days when a developer picked up building plans and rolled them up and went looking for partners are over, says Sawchyn. Anthem and others are "marrying up" with builders and looking for employees much earlier - before the designs are completed.

Construction times have also been extended, prompting developers to starting planning a new retail centre two years before the shovel hits the dirt.

Sawchyn says Anthem does not have any strip mall developments planned, rather it is concentrating on power centres such as the Bend Centre at Byrne Road and Marine Way in Burnaby - simply because that's what its customers have asked for, he adds.

However, Hudema warns the strip mall redevelopment trend could be coming to an end. He forecasts a slowdown of redevelopment in large cities in coming years, while new facilities will continue to emerge in smaller communities.

(Monte Stewart can be reached at monte@businessedge.ca)