Canada Retail Rent Survey H1 2025

The Canadian retail landscape was thrown into a period of flux in the first half of 2025. Ongoing trade war negotiations, the Canadian federal election and economic uncertainty came to a head and weighed on the marketplace as consumer confidence dropped to a historic low in March. It has since rebounded to a more neutral stance as the shock factor from these events waned. The closure of HBC also loomed large over the sector during this time and will do so for the months and potentially years to follow. All this together, however, hasn’t spelled widespread dread across the industry.

Instead, retail fundamentals have continued to hold up and perform remarkably well. Deals, while taking longer to close, are still getting done albeit with greater levels of scrutiny. Tenant demand remains at a very healthy level with activity coming through almost all sectors although most particularly from health and wellness, fitness, grocery and restaurants. And, while consumers have tightened up their discretionary spending, they have continued to make purchases in a more intentional manner.

The long-term trajectory remains positive. Canada’s population continues to grow and with the notable exception of HBC anchored shopping centres, supply of quality retail space remains constrained. We anticipate that vacancy will remain low into the foreseeable future and rental rates for quality properties will continue to appreciate, albeit at a modest rate. The space left by HBC will take some time to be leased but we are seeing healthy levels of interest and leasing activity around the majority of the locations.

• There continues to be a marked slowing in rental appreciation being noted cross-country. Rent growth was recorded in just 16 of the total 120 format types or key urban areas captured in the survey this half. This ties H1 2022 for the period with the fewest increases since the inception of this report. Six reductions on benchmark rent prices meanwhile were noted.
• On a by-market basis, four of 11 markets once again reported no change in rents over the last six months. This ties the H1 2023 and H2 2024 editions for the greatest number of markets with no noted movement.
• Unenclosed community centres experienced escalating rents in four markets, the most of any retail format, followed by neighbourhood centres with increases in three markets. On average, cities with increases in these formats saw ranges rise by 9% from year-end 2024.
• While the majority of focus has remained on suburban sites, urban retail nodes are still experiencing demand and interest. Four key urban retail nodes across three markets noted increased rental rates. Pockets of vibrancy have been noted with some cities undertaking revitalization work.

Health & Wellness

The health & wellness sector is experiencing strong growth, driven by evolving consumer preferences that prioritize holistic well-being. Demand spans from fitness gyms to fertility centers, cosmetic enhancement clinics, preventative medicine, and traditional health practitioners. Recent high-profile deals include Equinox’s third location in downtown Toronto and Evolve Strength’s new flagship at The Post in Vancouver.

Momentum is coinciding with office landlords repurposing underutilized podium levels. Large-format HBC spaces are also emerging as attractive options for these tenants, particularly those seeking prominent, accessible locations.

Health & wellness operators benefit from a relative cost advantage to most other retailers. Although still capital intensive, these facilities are often less complex and costly to build, enabling growth for brands that are eager to expand.

Restaurants

Faced with eroding margins and profitability, restaurant operators are increasingly favouring second-generation space to save on high construction and fit out costs. To additionally combat this and reduce tenant exposure, urban landlords are taking on some of these expenses through tenant allowances for extensive buildouts. Savvy landlords see having these spaces in their portfolio as an additional amenity that helps drive attention and boost vitality to the surrounding area.

Suburban markets meanwhile are seeing robust restaurant activity especially where they can capture all-day traffic from morning through to late night. With consumers being more conscientious of their spending, overall experience and atmosphere are huge drivers for the sector. 

Big Box

Big box vacancy across the country remains low, with major players such as TJX, Value Village and Canadian Tire group of companies taking the most prime locations. Backfills from these locations and other B and C locations have seen strong interest from mid-box grocery, fitness and discount users.

The availability of box space is expected to increase in the second half of 2025 and into 2026 with the expected influx of HBC units hitting the market. There is strong interest in the majority of these boxes, however most will take time to absorb as landlords contemplate plans and re-align the centre to match the long term vision for their shopping centres.

Suburban retail leasing kicked off the year with strong momentum, fueled by a competitive pre-leasing market among new market entrants and expanding tenants.

In Downtown Victoria, turnkey restaurant spaces continue to be rapidly backfilled. New grocery tenants are also entering the downtown core, aiming to capitalize on anticipated residential growth.

The closure of Hudson’s Bay at Mayfair Mall and the Bay Centre presents a strategic opportunity for a new anchor tenant to secure over 375,000 sq. ft. of combined prime retail space.

Vacancy is expected to remain stable as demand for space remains strong. Lagging population growth coupled with a slower economy is directly impacting the mixed-use development pipeline, from which the retail market is reliant upon for new inventory.

Anchor tenants, apparel and QSR continue to drive most of the demand throughout the region with the likes of T&T Supermarket, Fitness World, Adidas and Diptyque leading the charge.

The future of the former Hudson's Bay stores will present opportunity for the market. Existing locations, although spread throughout the region, make up over 1.0 million sq. ft. and in some cases a significant portion of suburban mall occupancies.

Rental rates required for quality new suburban retail developments are substantial and have led to sticker shock for some tenants that have not traded recently, but demand in almost all quadrants is strong.

The daycare rollercoaster has continued with the Province of Alberta now limiting the number of licenses being approved for for-profit groups. Interestingly, this change in funding eligibility has not slowed demand.

Despite often significant renewal rate increases, the vast majority of tenants are renewing with some spaces coming back to the market where tenants cannot afford the recalibrated rents.

The Province of Alberta is cutting funding to daycares which will likely decrease the number of new operators opening in Edmonton. The lack of funding changes the break-even point for for-profit centres and thus has drastically decreased interest among these groups, which was formerly the busiest category in the market. 

Multiple downtown office towers are undergoing exterior and interior redevelopment projects and are looking for brand-name national retail tenants to fill vacancies in prominent ground floor locations.

The 2025 Oilers playoff run brought an estimated $266 million dollar boost to the local economy, benefiting many businesses especially those in hospitality.

Limited new retail space is being built due to high construction costs and land scarcity, which is pushing rental rates higher. Developers are now leaning on substantial pre-leasing before committing to construction.

Retail located downtown faces challenges from a struggling office sector and reduced foot traffic in the core. On the other end of the spectrum, suburban retail is thriving. This trend is expected to continue for the foreseeable future, further increasing the value of these primarily neighborhood centers.

Saskatoon's retail sector remains robust, boasting a tight 3% vacancy rate. Fueled by job creation, population growth, and a positive provincial economy, the market is experiencing strong demand.

The closures of Peavey Mart and Hudson’s Bay in the first half of 2025 created some large-box vacancies and impacted figures, however did not compromise Winnipeg's strong underlying fundamentals.

Hopewell recently completed construction of their first retail building at the Refinery District. Plans are underway for a second building to be completed later this year.

Winnipeg continues to struggle with a lack of quality retail inventory as development lags demand.

Hudson Bay's closure earlier this year affected three malls in Waterloo Region including Fairview Park Mall, Conestoga Mall and Cambridge Centre, and Stone Road Mall in Guelph.

Demand remains strong from quick service restaurant and specialty grocery uses.

Tenants providing health and medical services are also active including pharmacists with general practitioners, fitness training, hair and nail salons, spas, physiotherapists, and more.

Toronto’s retail leasing landscape has been robust as of late with new deals occurring in F&B, luxury and contemporary fashion along with fitness. Quality space is in very short supply and rents continue to appreciate along the hottest nodes of the city.

Yorkdale has continued to welcome first to market entrants. The latest is Gentle Monster, a Korean eyewear label known for its bold, fashion-forward eyewear and unique store designs.

In the world of Bloor-Yorkville recent exciting entrants include Luca Faloni, Loro Piana and Eleventy. Brands continue to flock to the area, showing the strength in the market.

Ossington meanwhile has had a wave of high-profile openings, cementing it as one of the most sought-after corridors for businesses looking to align with a cool, urban crowd.

There has been a small increase in availability in quality power centres, community and neighbourhood plazas, however, are generally garnering multiple offers. Rents continue to remain high with minimal inducements offered by landlords.

An increasing number of 5,000-20,000 SF spaces are becoming available with greater difficulty in finding new tenants with typical users in this size range citing caution due to tariffs and other economic uncertainty. Entertainment based users are the most interested in pursuing spaces of this size.

Larger institutional landlords are requesting annual increases between 2-4% on new leases, which is making it increasingly challenging to complete deals.

Challenges are being seen for new QSR transactions due to the dual impact of tariffs and a generally slower economy.

Sainte-Catherine Street W has seen a large increase in demand from international retailers. New deals are getting signed, and vacancies are getting filled.

The newest phase of Sainte-Catherine Street West revitalization from Peel Street to Saint-Marc Street is set to begin at the end of the summer. This ongoing initiative will replace aging infrastructure and enhance pedestrian spaces by introducing greenery, improve safety, and traffic flow.

Supply remains relatively limited for both existing and new product, with strong demand coming from food and beverage tenants.

In particular, retail plazas with onsite parking is experiencing robust levels of demand. Limited supply and little turnover within these centres have meant that any vacancy that pops up is quickly backfilled.

Base rental rates have remained flat since the last half of 2024 on new deals, however landlords are looking for hefty increases on renewals.