Retail leasing in Canada’s major markets is stabilizing after a period of strong momentum amid a flight to quality locations.
JLL recently released retail insight reports for Vancouver, Edmonton, Calgary, Toronto, Ottawa and Montreal, and executive vice-president of retail advisory services Casdin Parr spoke with RENX about both national trends and what’s happening in each of those markets.
The best high street locations in Vancouver and Toronto, as well as the best enclosed shopping centres and big box power centres across the country, are all performing well.
“Quality inventory is shrinking quickly,” Parr observed. “Coming out of the pandemic, there was much more availability in certain nodes and sectors, and that has very quickly been scooped up.”
Not a lot of retail space being built
While service-oriented retail on the ground floor of new mixed-use multiresidential buildings serves a need and plays an important role, it hasn’t swung the pendulum and had a major impact on the overall market.
High interest rates and construction costs have been the main factors behind a lack of new stand-alone retail space being built and that is causing inventory shortages that are expected to continue.
This will also likely delay some retailers from expanding or entering the Canadian retail market.
“Water hasn’t found its level in terms of the rents required to build new product,” Parr said.
Retail isn’t without its challenges with the loss of stores from chains including Nordstrom and Bed Bath & Beyond over the past year. However, these challenges can also present new opportunities for other retailers, according to Parr.
Some of the Nordstrom store vacancies have already been filled and Parr said property managers for others are preparing to make new tenant announcements in the near future.
Parr said 80 to 90 per cent of the space vacated by Bed Bath & Beyond didn’t even hit the market because it was snatched up quickly by other retailers.
“I think we’re in a really positive retail environment,” said Parr. “We’re continuing to see numerous international retailers entering the Canadian marketplace year in and year out.
“There’s still appetite for growth by the retail community and I think the quality assets are going to continue to get stronger and try to find ways to improve.”
Vancouver
Retail inventory has historically been tight in Vancouver and that remains the case today.
The Vancouver retail leasing market has been thriving, with significant rental growth over the past five years. While home improvement, home furnishings and jewelry are out of favour, an appetite for electronics, shoes and clothing has emerged.
International tourism still has room to recover and downtown retail will be given a further boost when it does.
Parr said there’s been continued growth in suburban areas, including Surrey and Burnaby.
QuadReal‘s 1.2-million-square-foot redevelopment of Oakridge Park shopping centre is expected to open in the Oakridge neighbourhood in the spring of 2025. It will feature a luxury component and the second Time Out Market in Canada.
Edmonton
The Edmonton retail leasing market is experiencing increased net absorption and consistent leasing volumes as major international retailers — particularly in the athletic, fashion and luxury sectors — are actively expanding their presence.
“The strength and momentum in Edmonton is more in the suburban parts of the city, at sites like West Edmonton Mall, Southgate and South Edmonton Common,” Parr observed, adding new flagship stores have opened at both West Edmonton and Southgate.
“The downtown core in Edmonton still has some runway in front of it to find its footing. There’s been some good things that have happened in the downtown Edmonton core, but retail is lagging a little bit behind.”
Calgary
Calgary’s retail leasing market remains robust, although rent growth is showing signs of slowing from its peak in mid-2023. Leasing volumes remain strong and demand for retail space continues to outstrip supply.
“From a retail perspective, Calgary is arguably the hottest market in the country right now,” Parr said.
“Consumer spending is back in a big way. As we always see in that market, it swings up and down and it’s certainly exceptionally strong right now.”
Toronto
Though rental growth has been decelerating, leasing momentum has continued to slow after its peak in late 2022. Overall retail sales have also plateaued, but food services, shoes, health and personal care, and sporting goods locations have all shown growth in sales.
“Toronto has been on a great run for the last 24 to 36 months,” Parr said, “and we’re going to continue to see more traction as the return to work in the downtown Toronto core continues to build momentum month after month.”
There’s also been growth in the suburbs and investments in the Yorkdale and CF Sherway Gardens shopping centres have been paying off.
Toronto remains the focus of international brands wanting to enter the Canadian retail market.
Ottawa
Despite a slowdown in consumption, Ottawa’s retail leasing market remains highly competitive, with availability rates slightly decreasing and notable growth in net rents.
The limited new supply delivered in 2023 has sustained a market favourable to property owners and operators.
Parr is seeing strength in the suburbs, where he believes shopping and power centres have benefited due to more people working from home in those areas.
While new retailers have opened at CF Rideau Centre over the past year, overall retail growth has been slower in downtown Ottawa. It’s hoped that continuing recovery in international tourism will benefit downtown retailers.
Montreal
Retail sales slowed in Montreal in 2023 and that’s expected to continue this year. Downtown retail has been negatively impacted by ongoing infrastructure construction, particularly on Sainte-Catherine Street, which is expected to continue for at least two more years.
The news isn’t all negative, however, as increased public transit ridership and the improving tourism industry should spur retail.
“Montreal has had a tremendous amount of interest in the marketplace from a number of brands that have not traditionally operated in the marketplace,” Parr said.
Carbonleo’s 824,000-square-foot Royalmount shopping centre, which will provide a luxury shopping destination in midtown Montreal, is slated to open late this summer. It will include an aquarium and the city’s first Rec Room.