Retail rents held steady in Canada’s dominant regional malls during the first half of 2023, with rent growth most often exhibited in open-air community shopping centres, select urban districts and within mixed-use developments. CBRE Canada’s newly released semi-annual survey reveals Calgary, Montreal and Halifax particularly enjoyed an upturn in retail rents, while declines were next to non-existent across all of the 11 major urban markets examined.
“Good real estate continues to be leased quickly, resulting in limited vacancy amongst the most in-demand formats, particularly those that are unenclosed,” Kate Camenzuli, CBRE vice president, and Christina Cattana, CBRE research manager, observe in their introduction to the survey results. “This is expected to continue, and when paired with a softening supply pipeline — a by-product of higher construction costs — could result in further rental appreciation over the next six months.”
The survey reflects asking rent ranges for Class A space in nine different retail formats and further drills down to traditional key downtown shopping districts in the 11 cities. Despite the holding pattern in growth, regional malls generally command the highest rents by a decisive margin within their markets. The exceptions are high-end retail enclaves in Toronto, Vancouver and Montreal, which post the highest rent ranges to be found during the first half of the year.
Vancouver’s Alberni Street commanded rents of $195 to $300 per square foot (psf), while Toronto’s Bloor-Yorkville neighbourhood pulled in rents from $200 to $250 psf. Asking rents along Montreal’s Rue Sainte-Catherine Ouest were in the $150 to $180 psf range.
Montreal’s retail landlords enjoyed generally favourable conditions across the board, with rent growth in three other downtown shopping districts, as well as in neighbourhood malls, convenience/strip plazas and mixed-use developments both downtown and in the suburbs. Calgary likewise saw rent growth in downtown and suburban mixed-use developments, convenience/strip plazas, open-air community malls and two of three downtown shopping districts. However, Marda Loop, in the 19th to 22nd Street SW zone of the city, was the lone vestige of falling rents across the entire 11-market survey base.
“Select cities have noted challenges with downtown areas, citing slower foot traffic from reduced office occupancy,” Camenzuli and Cattana report. “This sentiment and its subsequent impact on urban retail formats are not uniform across the country. In fact, five of 11 markets sawrental appreciation in two or more key urban nodes.”
Grocery retailers and quick service restaurants continue to show an appetite for space and underpin the rent gains in open-air formats. In Halifax, Kitchener-Waterloo, Saskatoon, Calgary and Edmonton asking rents for open-air community shopping centres, neighbourhood malls and convenience/strip plazas have surpassed or are on par with rents for enclosed community malls and power centres. Montreal and Victoria have also seen asking rents for open-air community shopping centres and enclosed neighbourhood malls climb above rents for enclosed community malls, while Edmonton’s open-air community shopping centres, neighbourhood malls and convenience/strip plazas command higher rents than power centres.
Commenting on general trends, Geoffrey Smith, a director with CBRE Canada, notes that medium-sized independent operators and specialty ethnic and health/alternative food enterprises have joined the traditional big-box grocery stores in leasing up retail space. As well, new fast food providers continue to come onto the market. Space demands in the fashion, children’s and pet-related market segments remained fairly static in the first half of 2023, but conventional online retailers are now increasingly looking for physical venues. The service/medical sector is also evolving.
“This sector has seen significant growth from non-traditional users such as fertility, medical spas and plastic surgery clinics. The introduction of these minor elective surgery clinics has offloaded hospital demand and is a boon to centres as they typically occupy non-primary locations,” Smith states.
