According to CBRE's new report, Canada's retail market remained strong in 2024, with demand for retail space despite limited new development.
The report, "H2 2024 Retail Rent Survey,” provides insights into trends and rental rates across 11 Canadian markets. It revealed that retail vacancy rates declined to historic lows last year, with many markets seeing rental appreciation.
CBRE expects these trends to continue into early 2025. Retail sentiment remains positive, and most sectors, including grocery, restaurants, quick-service restaurants (QSRs), health and wellness, and fitness, continue to experience strong tenant demand. However, long-term projections are less confident due to immigration curbs, potential US tariffs, and economic pressures on consumers.
"One of the largest drivers of retail growth has been immigration, which will moderate this year," said Alex Edmison, senior vice president at CBRE and head of the national retail group. "The threat of tariffs and their potential to throttle the economy could have a material impact at a time when consumers were already feeling pressure. But overall, we think that Canadian retail is in good shape heading into 2025."
The report noted that interest rates were key in sustaining consumer confidence through 2024. While rates trended downward last year, rising bond yields could limit future improvements. Retail space remains in short supply, with minimal new development expected soon. Even if economic conditions soften, CBRE predicted that retail availability will remain low.
The report identified notable shifts in rental trends across Canadian markets. Rent growth was recorded in 24 of 120 areas surveyed, marking a slowdown compared to mid-2024, when 40 areas saw increases. Four of the 11 markets surveyed reported no change in rents over the past six months, the highest number recorded since the first half of 2023. Mixed-use urban developments and unenclosed community centres experienced the most significant rent increases. However, select urban retail nodes continue to struggle due to reduced daytime foot traffic, pushing demand toward suburban retail locations.
The grocery sector remains highly competitive, with discount banner expansion leading growth. Brands like Loblaws are expanding their "No Frills and Maxi" formats, focusing on smaller stores between 10,000 and 20,000 square feet. T&T is also growing in key markets. However, due to low vacancy and a lack of new development, grocers are increasingly securing second-generation retail spaces and off-market deals.
The fitness industry is also experiencing widespread expansion, with offerings ranging from discount gyms to high-end studios. Boutique fitness concepts, including pilates and yoga studios, continue to gain popularity, while more prominent brands such as Equinox and Fit4Less are actively securing new locations. Community-based fitness offerings like Fairgrounds and Othership are also expanding, particularly in transitional retail spaces.
In the service and medical sector, consolidation and growth continue to reshape the market. The veterinary industry is undergoing rapid expansion alongside national consolidation efforts, while urgent care clinics and cardiovascular specialists are also increasing their presence in the retail space.
Luxury and apparel brands remain highly active, with athletic and athleisure apparel experiencing robust growth across high streets and enclosed malls. First-to-market brands such as Nike, ON, Alo Yoga, and Vuori have secured space in high-demand locations. Luxury retailers, including LVMH, are expanding in Toronto's Bloor-Yorkville area, further solidifying the district as a premier retail destination.
Retail trends across Canada continue to evolve, with high daycare demand tightening space in Calgary and QSR traffic surging in Edmonton as US brands expand. True North Real Estate is redeveloping Portage Place Mall in Winnipeg, while Hopewell's Refinery District will add 7,000 square feet of retail by mid-2025. Toronto's retail sector remains active, with new restaurants in the Financial District, Shake Shack expanding, and luxury boutiques opening in Yorkdale. In Montreal, Sainte-Catherine Street West is now 50 percent accessible, driving new leasing activity, with more expected in 2025.
CBRE's report indicated that Canadian retail markets remain resilient despite economic uncertainties. Strong demand, supply constraints, and continued expansion across key retail sectors suggest that vacancy rates will remain low in 2025. However, immigration policy shifts, potential US tariffs, and interest rate fluctuations could impact long-term growth.