What happens to the massive empty spaces left behind when Hudson’s Bay closes its doors?

Hudson’s Bay is closing all but six of its stores in Canada and many of those slated to shutter are located in malls where they are considered the “anchor tenant” — the primary draw that brings customers through the doors.

As liquidation sales begin the process of emptying hundreds of thousands of square feet of retail space, commercial landlords will have to face the monumental task of filling those vacancies.

“It’s going to be a big problem for landlords because The Bay’s footprint was so big. IIt was a legacy footprint, it wasn’t based on current sales,” explains retail analyst Bruce Winder.

He says some prime locations might not have a problem finding tenants, while others in less coveted areas could struggle. But in the current retail market, he feels it’s unlikely a single tenant will be able to take over a Bay store’s square footage, no matter where it’s located.

“That’s going to be an enormous challenge to try to find someone to take all of that space. They’re probably going to have to cut up the property, like chop up the space and lease different floors to different tenants I would imagine. Because there isn’t really sort of an ‘heir apparent’ who’s going to take over this massive footprint,” says Winder.

“The Eaton Center [in Toronto] had a Nordstrom up to a couple of years ago. That space has been divided into three retailers. I believe there’s going to be an Adidas store, there’s going to be a Simons and there’s going to be an Eataly. That’s sort of part and parcel with what some malls will do — split the space up and make it digestible for different maybe newcomers or companies that are looking to expand.”

Winder says the challenge of replacing The Bay is reflective of the change in consumer shopping habits.

“It’s the death of department stores. There’s no appetite. The price points are too high, no one buys that way anymore. The closest [thing to a department store] is Amazon and Walmart. Millennials, younger Gen Xers and Gen Z have zero affinity to department stores. They weren’t raised on that. They were raised on e-commerce and specialty stores, and that’s how they do business,” says Winder.

He says older Gen Xers and Boomers, who were the bulk of the customer base for departments stores, aren’t spending their money on products per se.

“They’re not buying things anymore. They’re spending on travel, if anything,” he says.

“I think the consumer’s gotten very educated so they know what they want and they want to be very specific,” adds Harp Bassi, Vice President of Finance at Dunpar Homes.

They acquired the erstwhile Sheridan Centre in Mississauga in 2019. It’s now being developed into Sherwood Village, a residential community of 14 towers, which will still retain the central mall that once housed a short-lived Target store that spanned 100,000 square feet.

Bassi agrees that as consumer behaviour turns to more curated experiences and away from one-stop-shops, the demand for sprawling retail spaces has dwindled. The former Target has remained empty since the American big-box retailer wrapped up its Canadian operations in 2015.

“That’s why [no one’s knocking down our door] looking for a 100,000 square feet to lease tomorrow,” he says.

“[The Target] will be demised into probably three or four units, roughly 20,000 square feet each.”

He envisions those smaller units being leased by service providers or retailers that would fit into a residential community, like a daycare. In that same vein, Bassi says there is an opportunity to repurpose these spaces outside the retail arena and they’ve had some success doing exactly that.

The Sheridan Centre was also home to a 52,000 square foot Eaton’s department store several years ago, which later served as office space for 1,200 employees of Royal Sun Alliance. That tenant vacated the space in 2020 and it now houses 17 full-sized pickleball courts, with the Eaton’s central skylight running across the ceiling above them.

“We kind of put our brains together and said ‘what could work?’ And with the rise in demand for pickleball and the architecture of the space, it kind of all fit together at the right time,” he says.

For commercial landlords, Bassi says that right fit is key. It took them more than two years to find the best one for them with Rally Pickleball opening for business in 2024.

“The physical space itself will dictate what [landlords] can and can’t do. We were lucky enough in this space to have the spans to fit pro pickleball courts, so it worked for us. [We couldn’t do this] in the Target space — it’s a little bit more condensed, the beams and the roof. So it’s all going to depend on the specific location of each individual department store that’s closing,” says Bassi.

“So [all this] retail space will get absorbed. It’ll just take time and people are going to have to just think of different ways of doing it and get creative.”

Winder also foresees unconventional tenants moving in to fill the void created by The Bay’s exit.

“In some cases you might see some type of car dealership. You might see pickleball courts, you might see additional service providers … they might take the space and turn it into condominiums too… whatever pays the rent,” he says.

“So it might not be a traditional retailer and it certainly won’t be any type of department store.”