RETAIL MARKET DEMAND STUDY: RUSSELL TOWNSHIP ONTARIO Prepared for: Russell Township Prepared by: Shore-Tanner & Associates June 11, 2019 Page 2 TABLE OF CONTENTS Page number I. Executive Summary 3 II. Subject Site and Growth Context 18 III. Socio-Demographic Analysis 20 IV. Retail Market Trends 26 V. Demand Estimation 31 VI. Summary of Existing Businesses 43 VII. Executive Interviews 46 Appendices: A: List of Existing Businesses In Russell Township 53 B: Executive Interview Guide 58 C. Businesses Whose Owners/Managers Were Interviewed 61 D. More Information about Shore-Tanner & Associates and Author of Report 62 Page 3 I. EXECUTIVE SUMMARY On behalf of Russell Township this study has been carried out by Shore-Tanner & Associates. Its purpose is to determine the scope of market demand for retail and service businesses in the Township, including in its recently expanded area. The main findings of the study are summarized below, followed by more detailed substantiation in the main body of the report. A. Subject Site The Subject Site is Russell Township (TWP), located to the east of the City of Ottawa. For the purposes of this study, the Township has estimated a total population of 23,830 by the year 2036 for all of Russell Township as per the Township of Russell Official Plan. B. Major Socio-Demographic Findings 1. Russell Township (TWP) is another commercial hub (in addition to Rockland) in the United Counties of Prescott and Russell (UCPR), and its businesses attract customers from within these counties and beyond. 2. The total population of Russell TWP increased by an average of 255 or 1.7%, and in UCPR by 790 or 0.9% per year from 2011 to 2016 (Table 3.1). 3. The 2018 population of Russell TWP is estimated at 17,170 and that of UCPR at 91,600. Their estimated average annual growth to the year 2028 is 326 or 1.9% and 1,125 or 1.2% respectively (Table 3.3). 4. Considering that an overall average annual population growth of 1% represents a growing and balanced economy, the future growth of both of these areas are estimated to exceed this generally accepted growth standard. 5. Due to the development of many housing units over $300,000 and attracting affluent families, including from Ottawa, incomes in both areas have significantly increased recently. As shown in Table 3.4, the 2016 median household incomes were: • Russell TWP $105,488 • UCPR $78,748 • City of Ottawa $85,981 Page 4 This is particularly important since the City of Ottawa’s household incomes are often among the top three to five cities in Canada. C. Retail Spending 1. On average, each resident of Russell TWP is estimated to spend $18,265, and those of UCPR as a whole (i.e., including the TWP) $17,380 in 2018 at all retail and service businesses within and outside these respective areas (Table 5.1). 2. The estimated spending of the residents of Russell TWP is $313.6 million in 2018, and $373.1 million in 2028 (i.e., average annual growth in spending of $5.9 million or 1.9%, Table 5.2). 3. At present, some of the spending of UCPR residents takes place at businesses in Ottawa and elsewhere. This leakage-out is due to the following factors: a) Some of the PRUC residents (including the TWP) work in Ottawa and spend some of their retail dollars there. b) There are no senior department stores (i.e., Simons, The Bay, Nordstrom) or other new and popular/trendy stores (e.g., J. Crew, Michael Kors) within UCPR. These stores exist in Ottawa, and attract customers from UCPR and other cities and towns within 1-2 hours drive. 4. There are, as well, customers from outside UCPR who shop at businesses there, including at those in Russell TWP (i.e., leakage-in). 5. As more, especially new, businesses are attracted to Russell TWP due to population growth and affluence, the leakages of UCPR’s shopping dollars to Ottawa can be expected to decrease, and the leakages into UCPR will increase. Russell TWP in turn, is in a good position to capture some of the leakage-in sales. D. Demand Estimation 1. The spending of the residents of Russell TWP is estimated to support a minimum total of 901,800 sq. ft. of floor space in 2018, increasing by an average of 17,090 sq. ft. annually, to 1,072,700 sq. ft. by 2028 (Table 5.3). These spaces, furthermore, are within, but also outside Russell TWP. Page 5 2. The minimum1 supportable increase by time frame is (Table 5.4): • 2018-2020 38,700 sq. ft. • 2021-2023 15,800 sq. ft. • 2023-2028 80,400 sq. ft. • 2018-2028 170,900 sq. ft. 3. At present, some of the total supportable space is outside Russell TWP since its residents do not spend 100% of their shopping dollars at Russell businesses. E. Inventory of Existing Businesses 1. As of October 2018, there were 158 retail and service businesses in Russell TWP, and they occupied an estimated total of 531,000 sq. ft. of floor space (below, and Appendix A). 2. Based on the industry standard of 30 to 40 sq. ft. of floor space per capita, Russell TWP is under-stored for retail and service businesses. 3. Of the 158 existing stores, a total of 19, with a combined size of 35,000 sq. ft. or 6.7%, were vacant and this rate is within the industry range of 4% to 8%. Area No. of Businesses Total Space (sq. ft.) Embrun 119 382,600 Russell Village 35 115,000 Limoges 4 33,400 Total 158 531,000 F. Executive Interviews We interviewed a total of 27 business owners, managers, or owner-managers in-person, on a confidential basis, in February and March 2019 (Table 7.1 and Appendices B and C). Key findings of this research are: 1 These figures are based on population forecasts by Hemson Consulting Ltd., which have turned out to be too low in recent years. Higher population forecasts would, of course, increase the additional supportable retail and service floor space. Page 6 1. The majority (85%) of these businesses had been at their current locations for 11 years or longer. In view of Russell TWP’s population growth, the residents’ normal demand for new, different, and trendy businesses, we believe that the TWP’s retail sector is now ready for expansion, diversification, and new businesses. 2. The number of male and female owners/managers was close (15 and 12 respectively), and 44% of all business owners also owned their properties. 3. Two-thirds of the 27 businesses were small and independent, and the remaining third were chain stores. 4. Being on main streets, having easy access, good exposure, and a supportive community were mentioned most frequently by the interviewees as advantages of being in their current locations. 5. The most severe and challenging problems mentioned by the 27 interviewees are: a) TWP residents shopping in Ottawa. b) Lack of parking. c) Too many old, unattractive, and “passé” businesses. d) Rapidly increasing costs of doing business. 6. The most frequently mentioned things that Russell TWP government can/should do to help the business community are: a) Relax signage restrictions. b) Promote the TWP. c) Improve roads/transportation. 7. The total annual sales of 12 (44%) of the 27 businesses had increased in the last two years, for 8 it had stayed the same, and for 4 it had declined (3 did not disclose). 8. One of the most positive findings of these interviews is that 19 or 70% of the 27 businesses reported that they captured/attracted 11% or more of their total annual sales from outside Russell TWP (including 6 or 22% which captured more than 50% of their total annual sales). 9. About half of the businesses (14) offer their products or take customer orders online. Also, Facebook, other social media, and newspapers are the most frequently mentioned methods of promotion and advertising. Page 7 10. When asked what businesses or anything else is missing in Russell TWP which could improve its retail sector, the most frequent responses were: a) Good quality restaurants. b) Tourist-type businesses. c) More modern, popular businesses. d) More special events, festivities, promotions. e) A hotel. G. Recommendations In Russell TWP. and generally elsewhere, an overall average of up to 40 sq. ft. of retail and service floor space is generally supportable on a per capita basis.2 Due to leakages in and out, however, it is not always possible to accurately calculate the actual floor space supported by each resident by location of shopping. There are three positive factors in the TWP. for its retail industry. They are recent population growth which is expected to continue, the high incomes of most of the TWP.’s residents, and shortage of retail and service business. This combination is unique, positive, and provides the context for the study’s recommendations and its retail action plan below Based on the research for this study, including a review of the reports provided by Russell TWP,3 we recommend the consideration of the additional businesses identified in Table 1.1. Further explanations and information for our recommendations, and more generally for the Township’s retail sector, are as follows: 1. The most successful retail facilities generally have a combination of chain and independent businesses. Most chain businesses are in shopping centres, and most 2 At a total population of 17,170 in Russell TWP, the total existing floor space of 531,000 in 2018 represents 31 sq.