Montrealers battle over reasons why their booming city is plagued by empty storefronts
Published Sunday, February 2, 2020 9:14AM EST Last Updated Sunday, February 2, 2020 7:59PM EST
MONTREAL -- On the corner of Montreal's historic St-Laurent Blvd. and trendy St-Viateur Street -- known for the 24-hour St-Viateur Bagel Shop -- lies an empty storefront that has become a symbol of the city's retail woes.
Danny Lavy, co-owner of the company that owns the building, has joined a list of real estate players fingered as neighbourhood villains in various pockets of the city.
Lavy and other landlords are accused by local residents, city politicians and small business owners of being major contributors to the wave of vacant storefronts plaguing such storied Montreal arteries as St-Denis Street, Ste-Catherine Street, and Park Ave.
The city last month began holding public consultations to gather suggestions on what to do about the estimated 15 per cent of street-level retail space that sits empty despite a growing population and booming economy. Those who appeared before the committee cited city taxes, lack of parking and changing consumer habits to explain the problem.
But many also expressed frustration with what they called avaricious landlords, who they say are snapping up buildings in popular neighbourhoods, forcing out long-standing tenants with rent hikes and then letting the storefronts sit empty.
Lavy says anyone who believes that doesn't understand basic economics and the realities of running a business in Montreal.
"Are you joking?" he said in a recent interview at the suggestion his company purposefully lets storefronts sit empty. "We are willing to take ... lower and lower rent. You think I'd rather pay my mortgage and city taxes and be empty?"
Buildings on popular streets such as St-Viateur are worth a fortune, he said, adding that former owners on the strip were more than happy to sell to him. When you factor in new mortgage payments, city taxes and renovation costs, landlords need to find tenants who can pay prices that reflect the market's new value.
The empty store at the corner of St-Laurent and St-Viateur used to house a cafe and music venue selling a meatless menu to a mostly young and bohemian clientele. But Coop Le Cagibi was forced out in 2018 when the previous landlord jacked up the rent. The space has been empty since.
City councillor Richard Ryan is running the consultations and says the city doesn't have the data to quantify the role real estate speculators and wealthy landlords are playing in the vacancy problem.
But Ryan, who represents the Mile End district where Le Cagibi was located, said there is "no reason" a renter can't be found to replace it.
Roughly 14,000 workers around the neighbourhood shop and eat on St-Viateur daily, Ryan said in a recent interview. Mile End is also one of the most densely populated parts of the city. St-Viateur, he said, "has all the elements."
Mark Lazar, a real estate developer with mixed-use properties across the city, said it's easy to blame so-called greedy landlords for vacancies, but a deeper reflection on the matter reveals other causes.
A lot of vacancies on commercial arteries are big spaces that don't respond to the current needs of the market, Lazar said in an interview.
Fifteen years ago many of these spaces were filled with spacious restaurants feeding large crowds, he said, but today "entrepreneurial young chefs" are opting for cozier spaces.
Additionally, landlords have to pay hefty upfront costs to renovate before tenants move in.
"Today, the cost of (having) a tenant is not well understood," Lazar said. "They think any tenant can walk in like they walk into an apartment that is already furnished."
A business owner on Ste-Catherine Street, who didn't want to be named because she is in litigation with her landlord, said in an interview she had tried in vain a couple of years ago to negotiate an affordable rent for several unoccupied retail spaces on the street.
But at least four times, she said, the various real estate agents didn't want to negotiate because the owners allegedly didn't care whether it was rented or not. Even empty, the buildings were "just gaining value," she was told.
But Lazar and Lavy say the main factor behind the vacancies is taxes.
Global real estate consultant firm, Altus Group, calculates that Montreal has the highest commercial real estate taxes among large Canadian cities.
Montreal taxes, Lavy said, "are completely out of whack for a retail operation. Retail is already destroyed because of the internet."
Ryan and his committee are still collating data from an online survey and from the consultations. He couldn't say when he'll be able to propose recommendations to the council or what they will include.
But, he said, "people are expecting us to do something."
Ryan said he's heard from fiscal experts that big landlords can write off losses associated with empty properties to reduce taxes on revenues from other buildings in their portfolio. Alternatively, he said, the big players have the financial cushion to let the space sit empty and wait until a major chain comes knocking with the means to pay the high rent.
Ron Rayside, with architecture firm Rayside Labossiere, filed a submission to Ryan's committee, in which he suggested the city impose a tax on owners who let their storefronts sit empty for long periods of time, with the levy increasing the longer it is left empty.
A commercial artery is the heart of a neighbourhood, he said in a recent interview, and there is growing concern that too many are being allowed to wither.
"It's where people walk around, where there is life, where you can meet people," he said.
Lavy said he had good news for those worried about St-Viateur: He found a business to replace Coop Le Cagibi.
"I'm putting a lot of money into it. It's going to be open by the summer," he said. "I can tell you every place I have on St-Viateur will be open by the summer. And I happen to love St. Viateur. Not like -- love."
This report by The Canadian Press was first published on Feb. 2, 2020.