Canada retail market dynamics

Executive Summary

The outlook for retail leasing remains positive, with industry stakeholders maintaining optimism about the next twelve months. Demand has strengthened, particularly in Toronto, Calgary, and Edmonton, and average asking rents continue to rise.

Vancouver, Toronto, and Ottawa-Gatineau retain the lowest availability rates among Canadian and U.S. markets. New large super-regional malls in Montréal (Royalmount) and Vancouver (Oakridge Park) are set to provide temporary relief, but no long-term resolution is in sight.

While sales of discretionary goods have softened, food and beverages continue to experience moderate growth. This is attracting more new players, especially those with a focus on tourism.

Rising international visitation and commuting contribute to a positive perspective for downtown areas. Additionally, the gradual return of Chinese tourists should help solidify new luxury nodes in urban malls in Toronto, Montréal, and Vancouver.

Demand strengthens as new supply plummets

Demand for retail space has risen, with the first half of the year up slightly from 2023. Toronto, Calgary, and Edmonton lead the way with the most net absorption.

General merchandiser Costco Wholesale and clothing retailer La Maison Simons have leased some of the largest spaces. This includes a 150,000 s.f. Costco store in Brantford, ON, a 110,000 s.f. Simons space in Toronto Eaton Centre, and another 118,000 s.f. Simons space in Yorkdale Shopping Centre.

Grocers have also announced large-format expansions, with Loblaws opening a 55,000 s.f. T&T Supermarket at Burnaby’s Gilmore and FreshCo opening a 40,000 s.f. location at Edmonton’s Glenridding. Loblaws is also testing smaller formats under 10,000 s.f. with its No Frills and No Name banners.

The former Toronto Nordstrom spaces have piqued interest, with Simons, Nike, and Eataly securing space in the Toronto Eaton Centre and Nike and Mango at Bloor and Yonge.

Montréal, Vancouver, and Toronto are expected to boost luxury with openings in Royalmount, Oakridge Park, and Yorkdale Shopping Centre.

Food services have dominated store-opening announcements, with Eataly announcing its fourth location in Toronto – surpassing even Dubai and New York City and matching Tokyo.

The number of store-opening announcements nationwide remains robust, followed by specific announcements in Toronto, Ontario (excluding Toronto), Western Canada, and Québec.

While some Canadian markets continue to have among the highest levels of construction in North America, new supply of retail space continues to decline. The real estate industry is grappling with increased construction costs and high interest rates, leading to a slowdown in retail development starts and to longer construction timelines.

This trend seems to be creating a domino effect, where decreased completions result in fewer leasing opportunities for retailers seeking new spaces. Consequently, move-ins, move-outs, and overall leasing activity have also decreased.