Vacant Bay stores could spark interest — if landlords are willing to get creative

A Hudson's Bay department store is shown at Sherway Gardens in Toronto on Thursday, March 9, 2023. THE CANADIAN PRESS/Nathan Denette

TORONTO — Apartments, health centres and even pickleball courts may be coming to your local mall after Hudson’s Bay departs.

Retail and real estate experts say the closure of most of the 355-year-old company’s department stores offers a chance to reimagine the country’s most sought-after and high-traffic spaces in malls.

“I think it’s a massive opportunity for landlords to reinvent,” said Kate Camenzuli, vice-president of retail at commercial real estate company CBRE.

“It may take a bit of time, but I think it’s a huge positive because this is the last large-format piece of space that will be and is available in the Canadian marketplace.”

The 74 Hudson’s Bay, two Saks Fifth Avenue and 13 Saks Off 5th stores set to be vacant as Canada’s oldest retailer closes all but six sites typically cover about 120,000 square feet apiece.

Some locations like the Toronto flagship on Yonge Street are enormous: Hudson’s Bay takes over 675,700 square feet there and the adjoining Saks another 175,000 square feet, court documents say.

The retailer’s stores tend to be in Canada’s busiest shopping corridors, making them prime for a reinvention some landlords have quietly been thinking about for years.

“In my landlord days, we had plans on ... resetting the Bays for pretty well, I don’t know, 15 or 20 years, for sure,” said Toran Eggert, who advised landlords before becoming managing partner at Toronto-based real estate brokerage Urban Reform Realty.

Because Hudson’s Bay sold much of its property and took on leases in recent years, any reinvention will largely hinge on the outcome of the company’s creditor protection case.

An Ontario court gave the retailer permission to gather bids from companies wanting to buy or assume its leases. But businesses looking to supplant Hudson’s Bay may have to meet the same terms the retailer agreed to when it obtained the leases.

That would likely require the leaseholder to take over the entire property and could even stipulate the occupant be a department store, leaving few companies able to meet the requirements. If no tenant signs on under those circumstances, it’s possible a landlord could start over with a new company, and new lease terms.

Landlords want as much control back as they can get, said Eggert, but few brands other than Walmart, Canadian Tire, La Maison Simons, The Brick, Ikea or grocery stores would want as much space as Hudson’s Bay will leave behind.

“The size of the floor plans are massive, and in today’s world, people just aren’t looking for anything that big and that’s going to be a real challenge,” said Lanita Layton, a luxury and retail consultant who was once a vice-president at Holt Renfrew.

She imagines a European department store could swoop in but thinks it’s much more likely malls will wind up breaking up the space, mirroring the Eaton Centre in Toronto, where Simons, Eataly and Nike will soon take over two floors previously held by Nordstrom, a U.S. department store which departed in 2023.

If landlords go that route, Layton said there is likely to be interest from more traditional retail brands as well as food hall and entertainment operators.

Camenzuli thinks the Hudson’s Bay departure would allow escape rooms or driving or golf simulators to enter the market, while Kate Black, the Vancouver-based author of “Big Mall,” envisions pickleball courts and medical services joining the mix.

In more dramatic instances, both even see landlords rezoning their anchor tenant sites for residential uses.

However, Black warned some malls, like those in smaller towns, may not get a shot at reinvention because the Bay’s departure will be a death knell for the entire property.

“When those main event tenants like the Bay close down, the rest of the mall is put at threat,” Black said. “So it’s not just the Bay closing, but now the food court is at risk of shutting down.”

But its exit won’t send most premium malls into a tailspin. In fact, it will be “a better win for the shopping centre than having a bit of a big box that has crickets going through it,” said Camenzuli.

She reasons new tenants will generate more traffic and also sign leases that better favour landlords.

Lawyers for Hudson’s Bay landlords have said the retailer’s leases carry “extraordinary” benefits and concessions, including “more favourable rent.”

“Those leases were done quite a while ago, and if they were restructured, they were restructured in the Bay’s favour, so it’s not even close to what market is,” Camenzuli said.

Crafting a new lease with a new tenant won’t be quick. Neither will the time it can take to accommodate the new occupant and any construction they require, said Eggert.

“The whole process can take a couple of years,” she said.

“But mark my words, they’re all on the phone right now making sure that there’s some key interest in their in their sites.”

This report by The Canadian Press was first published April 1, 2025.

Tara Deschamps, The Canadian Press