Retail rent movement was mostly in an upward direction across Canada’s largest urban markets during the first half of 2024. Toronto and Ottawa emerge as rent growth leaders in CBRE Canada’s newly released survey, while power centres have enjoyed the most consistent nationwide gains among nine retail segments monitored. Analysts foresee the meld of robust demand and continued reluctance to build new space will keep pushing rents up through this summer and fall.
“The Canadian marketplace is currently in a supply-deprived environment,” says Molly Westbrook, executive vice president and managing director with CBRE’s national retail group. “Retailers are being strategic, but are also having to move fast.”
Downward rent trends were rare anywhere within the 11 markets CBRE monitors — observed only in downtown mixed-use development in Vancouver and enclosed community shopping centres in Waterloo Region. In contrast, 40 different combinations of markets/retail segments posted rent gains above the second half of 2023, which CBRE reports as the most widespread improvement in any six-month period since it launched the rent survey.
Notably, power centres commanded higher rents than last year in all seven markets east of Alberta. Open-air community shopping centres and convenience/strip plazas each made rent gains in five markets, while retail in downtown mixed-use developments realized increases in three markets.
The latter trend is tied to the limited delivery of new retail supply, which is mostly occurring as new mixed-use residential-commercial projects are completed. Particularly in Toronto, where rents increased in five of nine retail segments over the course of the winter and spring, urban mixed-use developments are flagged as key to the competitive mix.
“Quality space is in very short supply and rents continue to appreciate,” says Arlin Markowitz, executive vice president with CBRE in Toronto. “In response, tenants are starting to widen their search area to include nodes farther outside the traditional core markets to sites with higher levels of intensification.”
“The next wave of retail supply will predominantly come in the form of mixed-use developments as city councils seek to increase density featuring CRUs (commercial retail units) at grade,” concurs Adrian Beruschi, a senior vice president with CBRE in Vancouver. “At present, there are over 120 multifamily developments throughout the Metro Vancouver region that are incorporating retail in some way.”
Asking rates for urban mixed-use retail locations are markedly higher in the two cities — in the range of $40 to $75 per square foot (psf) in Toronto, and $60 to $90 psf in Vancouver — than in other Canadian cities, particularly those in the prairie provinces. However, space in urban mixed-use developments is a bargain compared to key downtown shopping districts in the two cities.
Toronto’s Bloor-Yorkville district is Canada’s priciest retail real estate, where rising rents hit the range of $225 to $300 psf during the first half of 2024. The most moderately priced of Toronto’s five downtown retail districts, along Ossington Avenue, also saw rent gains in the first half, bumping them up to the range of $60 to $80 psf.
Meanwhile, rents in Vancouver’s four downtown shopping districts held steady this winter and spring. Alberni Street continues to command rents in the range of $195 to $300 psf, while rents on Granville Street, the most affordable of the four areas, hover around $85 to $125 psf.
Looking to markets with differing land use patterns, Calgary charted rising rents in mixed-use suburban developments. That’s a retail segment that doesn’t even exist in three of the surveyed markets (Ottawa, Waterloo Region and Winnipeg), while incoming tenants in Calgary forked out $35 to $55 psf in the first half of this year.
“Record-setting migration into Alberta of over 202,000 people last year has continued the demand from retailers and service providers for suburban centres in the city, but there is a scarcity of options for them and, as such, rents have continued to increase,” says Alistair Corbett, a CBRE senior vice president in Calgary.
While power centre rents held steady in Calgary during the first half, at $27 to $55 psf, they are on par with or higher than most of the markets that experienced an uptick. Meanwhile, Calgary was among the five markets where convenience/strip plaza rents increased, continuing the upward trajectory of 2023.
Demand for grocery store space is a factor in all markets, although areas experiencing residential intensification are deemed to be the best bet for expanding retailers. Major grocers’ discount brands, including No Frills, FreshCo and Food Basics and ethnic food specialists are currently active. Analysts also speculate that grocery retailers will be the drivers of most new development that may occur in the near term.
“The competition for real estate and market share is ultimately driving up rents on larger boxes with no grocery restrictions,” says CBRE vice president, Matthew Jackson. “As population growth has moved to secondary and tertiary markets, brands have been forced to look at new build opportunities (despite construction costs) in order to remain competitive.”
