Late last year, Price Tags reported on the potential sale of Vancouver’s downtown Hudson’s Bay store, the iconic white terra-cotta building located at the corner of Granville and Georgia Streets.
Built in 1927 the 650,000 square foot building was assessed at $59.7 million, but potential sale prices were suggested to be as high as $900 million.
As reported in the Financial Post “Canadian department store owner Hudson’s Bay Co and joint venture partner RioCan REIT have signed a conditional agreement to sell HBC’s flagship store in downtown Vancouver for about $675 million (US$524.4 million) to an Asian buyer, a person familiar with the matter told Reuters.”
The Hudson’s Bay Company had previously leased their New York City store location to WeWork, a shared workspace business, setting the stage for a suggested change in the ownership (and purpose) for the Vancouver store, which arguably is on one of the most important heritage sites in the city, a block away from the Vancouver Art Gallery, and right beside the Canada Line.
The new buyer owns a real estate company but his or her identity will not be disclosed until the sale is final. “Hudson’s Bay is expected to sign a 20-year lease with the new owner, according to the person familiar with the matter. As part of the WeWork deal, the shared office space operator also agreed to lease the top floors of the Vancouver and other Hudson’s Bay stores.”
The Hudson’s Bay Company has been in Vancouver since 1887, first operating out of a storefront on Pender Street. The current store at Granville and Georgia is a Vancouver landmark.
Does the shifting of the top floors of the Hudson’s Bay store to shared use office show the decline in storefront department store retail?
Will the retail nature of this store — with its 91-year history — be retained?
Or is redevelopment looming for this building?
Photo: Fine Art America
There has been a shift to downsize even “flagship” downtown department stores.
The Lord & Taylor Store that HBC sold in NYC will drop to about 2 floors of retail.
The Macy’s (former Bon Marche) in Seattle has dropped to 3 or 4 floors of retail.
The Toronto Queen St. Hudson’s Bay effectively downsized by inserting a Saks 5th Ave. store into the building (and apparently it is doing poorly since it should have been put on Bloor St.).
The Vancouver Nordstrom only occupies 3 floors of the 7 storey former Eatons – I think it’s about 230,000 sq ft – about the size that large suburban department stores used to be.
Several years ago, when the men’s department moved to the 6th floor, Hudson’s Bay acknowledged it had excess space by shopping around the subbasement and basement levels of the Vancouver store (space next to and below TopShop) to 3rd party tenants. But no takers.
PS – I’m curious to see how much space Hudson’s Bay leases back from the new owner. The article doesn’t say that. The new owner could lease more space to WeWork if it can get a better lease rate.
That could force some Hudson’s Bay departments like housewares or menswear back into the claustrophobic basement levels.
Does the building have heritage status protection from the city?
In theory, yes, it’s a designated Heritage Structure. so replacing it, or making changes to it is (at least theoretically) difficult. The owners could request an addition, particularly if there are any potential seismic issues with the existing building (which was built in different phases, as the postcard at the top shows).
Selling the real estate and leasing it back is the first move that can lead to the eventual demise of a large retailer. Eatons and Sears did the same thing. The selling process raises cash, but the new cost of leasing valuable space in a ferociously competitive industry with thin margins is difficult to absorb.
I worked for Ikea for many years, as a private company they go against retail convention in certain ways. They own the land for almost every single store with the following benefits:
They don’t pay rent to another company.
They do pay rent to themselves, with attendant tax reduction possibilities.
The land forms a long term asset, not spectacular in growth but a useful diversification that adds to the financial strength of the company.
That really depends on the retailer and the cost of the building sold.
If they’re getting $675M, that can translate into a lot of revenue for a long time if the right investments are made.
I agree that real estate under your belt is a solid asset for retailer
– against which they can borrow as necessary.
The same applies to retailers both big and small, as many small retailers in Vancouver can attest to.