As part of Retail Insider Reports, this Q3 2026 Real Estate & Leasing Report analyzes Q3 2026 developments in Canadian retail property and leasing. Drawing on Retail Insider coverage, industry research, landlord disclosures, government data, and broader market signals, it identifies key dynamics shaping landlords, tenants, investors, shopping centres, and redevelopment projects. These reports are designed to deliver executive-level insights across major retail sectors and can be accessed through the Retail Insider Report Hub.
This report examines retail real estate, leasing, shopping centres, mixed-use developments, landlords, tenants, mall operators, redevelopment, and commercial retail property trends.
Report Contents
Executive Summary
Canadian retail real estate entered the final quarter of 2026 with exceptionally tight conditions at some properties and millions of square feet of former department-store space still moving through redevelopment.
Choice Properties reported retail occupancy of 97.4%, Crombie ended its second quarter with committed occupancy of 97.5%, and CT REIT reported 99.5%. Renewal spreads were also strong across several portfolios, supported by grocery, service and other necessity-oriented tenants.
The national picture was more complicated. Canada’s overall retail vacancy rate remained around 2.5% following Hudson’s Bay closures, while shopping-mall vacancy had risen sharply as the market absorbed almost five million square feet of negative net absorption. CoStar expects mall vacancy to remain elevated for several years.
A nearly full grocery-anchored centre and an enclosed mall redeveloping a 150,000-square-foot former department store face very different leasing conditions, capital requirements and timelines. Landlords are making progress replacing major vacancies, but former anchors frequently require subdivision, new entrances, building systems, permits and substantial landlord and tenant investment before replacement businesses can open.
The distinction is visible in landlord results. Primaris reported 86.6% in-place occupancy against 91.1% committed occupancy, while Crombie reported 96.6% economic occupancy against 97.5% committed occupancy.
The next phase will be measured by how much committed leasing becomes open, rent-paying space and what returns landlords generate on the capital required to create it. Canadian retail-property conditions remained highly selective during Q3 2026, with some grocery-anchored and necessity-oriented portfolios reporting near-full occupancy while enclosed malls continued absorbing large former department-store vacancies.
Several themes emerged during the quarter:
- Choice Properties, Crombie and CT REIT reported high retail occupancy and strong renewal spreads, supported by established national tenants and necessity-oriented shopping.
- National conditions were less uniform, with elevated mall vacancy following Hudson’s Bay closures and rent growth expected to moderate.
- Committed occupancy can exceed in-place or economic occupancy because signed tenants may not yet have opened or begun paying rent.
- Former department-store replacements increasingly involve multiple tenants and substantial redevelopment instead of another retailer taking an anchor box intact.
- Higher replacement rents can create significant income potential, but returns also depend on redevelopment capital, downtime and rent commencement.
- Ownership transactions and acquisition activity demonstrate continued interest in Canadian retail property, although acquisitions, redevelopment plans and operating income represent different stages of investment.
The next several quarters will show how much announced and committed leasing converts into productive space and rental income.
Retail Insider Coverage
Grocery and Necessity-Based Properties Remain Tight
Some of the strongest landlord results came from portfolios anchored by grocery, service and established national retailers. Choice Properties ended Q2 with retail occupancy of 97.4% and completed about 643,000 square feet of renewals at an average spread of 12.4%. Excluding fixed-rate renewal options, the spread was approximately 20%, illustrating how the composition of expiring leases can affect the headline result.
At Bloor and Dundas in Toronto, Choice is dividing approximately 90,000 square feet formerly occupied by Loblaw between Shoppers Drug Mart and GoodLife Fitness. Shoppers had taken possession for fixturing, while GoodLife possession was targeted for early 2027. A separate 82,000-square-foot property in Laval required rezoning before redevelopment could proceed.
Crombie reported 97.5% committed occupancy and 96.6% economic occupancy at the end of Q2. Economic occupancy represents space under lease where rent has commenced, while committed occupancy also includes completed leases for future occupancy of currently vacant space.
The REIT completed approximately 121,000 square feet of Q2 renewals at rents 11.3% above expiring rates. Its grocery-oriented portfolio benefits from recurring visits, while Empire’s 61.5% share of annual minimum rent creates substantial tenant concentration.
CT REIT reported committed occupancy of 99.5% and a blended renewal increase of 10.4%. Canadian Tire accounts for the overwhelming majority of its gross leasable area and annualized base minimum rent. The results demonstrate the strength of well-leased necessity-oriented retail, but the structures of these portfolios help explain why their occupancy and renewal figures should not be generalized across the Canadian market.
Leased, Open and Cash-Paying Are Different Stages
Primaris provides one of the clearest examples of the difference between leasing progress and current property income. The mall-focused REIT reported 86.6% in-place occupancy at the end of Q2 compared with 91.1% committed occupancy. At June 30, approximately 600,000 square feet of former Hudson’s Bay space had been leased, with another 300,000 square feet in advanced negotiations. Occupancy dates for the leased space extend from early 2027 through mid-2029.
Primaris has estimated redevelopment capital of $175 million to $225 million for its former HBC space. Replacement net rent is expected to average approximately $17 per square foot compared with roughly $4 per square foot previously paid by Hudson’s Bay.
The increase creates substantial potential rental growth, but it comes with redevelopment capital, construction, tenant delivery and several years of staged rent commencement. The economics become clearer as tenants open, rent begins and the redeveloped space moves toward stabilized operation.
Former Department Stores Are Becoming Multiple Destinations
Galeries de la Capitale in Quebec City shows what anchor replacement can involve at the property level.
Primaris is investing approximately $19 million to convert the roughly 163,000-square-foot former Hudson’s Bay into a multi-tenant retail and restaurant wing. Imaginaire has committed to approximately 30,500 square feet, with an opening targeted for spring 2027, while ZIBO! is taking approximately 5,500 square feet.
The conversion includes an exterior entrance and new washrooms, while Imaginaire is investing approximately $2 million in its store separately from Primaris’s landlord expenditure. Other spaces are expected to be delivered progressively through 2027.
Central Walk is undertaking a larger conversion across Woodgrove Centre in Nanaimo and Mayfair Shopping Centre in Victoria, involving approximately 310,000 square feet of former Hudson’s Bay space.
At Woodgrove, H Mart has been confirmed for roughly 30,000 square feet alongside TM Wander and family entertainment uses. Haidilao is planned for Mayfair, while another international retailer has been in negotiations involving both properties.
Expected combined landlord and tenant investment at Woodgrove is approximately $30 million to $40 million, including about $10 million from the landlord. Major uses are targeted for spring or summer 2028, subject to permitting and approvals.
The strategy replaces one large anchor with several reasons to visit across different parts of the day. Its contribution to traffic, tenant sales and property performance will become measurable once those businesses are operating.
At CF Sherway Gardens in Toronto, Splitsville plans a 34,000-square-foot bowling and entertainment venue in part of the former approximately 140,000-square-foot Nordstrom, targeting fall 2027. The lease is significant, but represents one component of the former anchor’s reuse.
Capital Is Still Moving Into Canadian Retail Property
Major ownership and financing activity continued during the quarter. The $9.4-billion transaction involving First Capital, KingSett Capital and Choice Properties would see Choice acquire approximately $5 billion of assets, with KingSett acquiring the remaining assets and outstanding units. The transaction had received court approval in late June 2026.
Westcliff’s acquisition of Edmonton’s approximately 880,000-square-foot Kingsway Mall from Oxford represented a different investment case. The property moved to an established private shopping-centre owner, with no immediate comprehensive redevelopment announced.
Jadco’s acquisition of the corporate entity holding Montreal’s Centre Rockland offers longer-term redevelopment possibilities, although no new master plan or former-Hudson’s Bay replacement had been announced.
Primaris raised approximately $200 million through an equity offering while reporting more than $1 billion of potential mall acquisitions under negotiation. The financing provides capacity for further investment, while negotiations remain separate from completed acquisitions.
Ownership changes can support continued operation, portfolio consolidation or redevelopment. Their significance depends on the business plan that follows.
Edmonton City Centre Highlights the Operating Challenge
Edmonton City Centre illustrates the different timelines of long-term redevelopment and current retail operations. A court approved Westrich’s proposed acquisition in August. Initial plans included approximately 1,500 homes, street-oriented retail and a rooftop Nordic spa on the former Hudson’s Bay portion, with major project details and construction timing still subject to further work and approvals.
Businesses in downtown Edmonton have meanwhile reported concerns involving public safety, vandalism, parking and prolonged construction access. Chamber survey results and business interviews identify conditions affecting merchants, although they do not establish that any single factor caused business closures.
Additional residents and destination uses could broaden the area’s catchment over time. Existing businesses still need workable access and trading conditions while redevelopment proceeds.
Broader Industry Coverage
Canada’s Retail Property Market Is Increasingly Selective
National data provide an important counterweight to the strongest landlord results. CoStar reported that Canada’s overall retail vacancy rate increased from approximately 1.8% to 2.5% following Hudson’s Bay closures and remained near that level over the subsequent year. Shopping-mall vacancy rose from approximately 3.1% to 8% in Q2 2025, when the closures produced almost five million square feet of negative net absorption.
CoStar expects overall vacancy to remain around 2.5% over the next year and mall vacancy to remain near 7% in three years. Retail rent growth, slightly above 2% in Q2 2026, is forecast to slow to roughly zero by Q2 2027 before recovering. About five million square feet of retail space was under construction in Q2 2026, while quarterly starts have remained below one million square feet since Q3 2025. Existing anchor vacancies still require suitable tenants, workable configurations and viable redevelopment economics.
CBRE’s first-half Canadian survey showed how sharply conditions differ by property type and location. Rents increased across 28 of 131 tracked formats and key urban areas and declined in eight, with grocery, service, medical, fitness and quick-service restaurant demand supporting parts of the market. A well-located grocery-anchored suburban centre can operate near capacity while an enclosed mall in the same metropolitan area works through a major anchor vacancy.
Retail sales add another consideration. Statistics Canada reported seasonally adjusted Q2 retail sales growth of 2.2% in current dollars but 0.4% in volume. July sales were up 5.1% year-over-year in dollars and 1.7% in volume.
The figures do not establish sales at individual properties, but the gap between nominal and volume growth matters when assessing retailer performance and capacity to absorb higher occupancy costs.
Headline Leasing Numbers Need Context
Strong leasing metrics can describe very different underlying circumstances. RioCan provided a useful example during its Q2 call when management discussed a GTA grocery lease renewed at double its previous rent. Management subsequently explained that the rent had last been negotiated at market approximately 30 years earlier, with relatively flat fixed renewal options in the intervening period. The increase captures decades of accumulated rental adjustment. It does not indicate that GTA grocery rents doubled over the preceding year.
Choice Properties’ results demonstrate the same issue differently. Its average Q2 renewal spread was 12.4%, rising to approximately 20% when fixed-rate options were excluded. Occupancy figures also depend on their definitions and denominators.
Morguard reported Q2 retail occupancy of 89.7%, including 95% at community centres and 87.8% at enclosed centres. At Cambridge, approximately 65,700 square feet was removed from active leasable area during redevelopment, changing the space against which occupancy is calculated. Committed occupancy, in-place occupancy, economic occupancy and renewal spreads are useful measures, but they answer different questions. Their definitions become particularly important when large spaces are moving through redevelopment.
Strong Leasing Can Coexist With Development Risk
SmartCentres reported 98.1% in-place and committed occupancy and had re-leased four of six former Toys “R” Us locations by the time of its Q2 call. Approximately 247,000 square feet of vacant space was leased during the quarter.
At the same time, the REIT recorded a $196.2-million fair-value loss on investment properties, reflecting market conditions and anticipated construction timing for certain future development properties, partly offset by lower discount rates at selected retail properties. Operating retail assets and future development properties can therefore produce very different results within the same portfolio.
The same applies to residential density associated with retail properties. Choice and RioCan described weaker conditions for selling residential density, while Primaris has emphasized that it intends to monetize suitable excess lands instead of becoming a residential developer. Long-term density can have value without contributing to current property income.
Editor’s Take & Outlook
What Retailers, Landlords and Investors Should Watch
For landlords redeveloping former anchors, rent commencement, capital requirements, tenant opening schedules and construction downtime will determine how quickly committed leasing becomes property income. Subsequent tenant sales and traffic will show how new uses affect the broader centre. Retailers considering former-anchor space need to account for landlord work, fit-out costs, possession dates, access during construction, neighbouring uses and the sequence of other openings.
For investors, high occupancy and strong renewal spreads remain important, but definitions matter. Committed space may not yet be producing rent, redevelopment can alter occupancy denominators, and unusually large rent increases can reflect leases that have not been reset to market for decades.
Capital requirements ultimately belong in the same analysis as the replacement rent being achieved.
Outlook: The Next Test Is Delivery and Cash Rent
The next several quarters will provide practical evidence of how Canada’s current leasing activity translates into operating property performance.
Primaris expects replacement tenants in former Hudson’s Bay space to begin taking occupancy in 2027, with other openings and rent commencements extending through subsequent years. At Galeries de la Capitale, tenants are expected to open progressively through 2027.
Splitsville is targeting fall 2027 at CF Sherway Gardens, while major new uses in Central Walk’s Vancouver Island redevelopment are expected in 2028.
At necessity-oriented properties, high occupancy and strong renewal spreads are already evident, while national rent growth is expected to moderate. Future results will show how durable those conditions remain across different markets and tenant categories.
The amount of space leased is one measure of progress. Openings, rent commencement and returns on invested capital will provide a more complete measure of the redevelopment cycle.
Editor’s Take
Canada’s strongest retail-property results can look remarkably good: occupancy approaching 100%, double-digit renewal spreads and major replacement leases for spaces vacated by department stores. Those numbers need to be read alongside what is happening inside the properties.
The former department-store redevelopment cycle is producing something structurally different from the anchors it replaces. One large box can become grocery, restaurants, entertainment and specialty retail, with each tenant requiring different space, investment and opening timelines.
That can ultimately produce higher rents and give consumers more reasons to visit a property throughout the day. The economics still depend on how much landlords and tenants spend to get there.
Over the next several years, the most revealing numbers may therefore come after the leasing announcements: stores opened, rent commenced, tenant sales and returns on redevelopment capital.
Those measures will show how successfully Canadian landlords have turned a historic wave of department-store vacancies into productive retail real estate.
Representative Articles
- First Capital Sale Marks End of an Era in Canadian Retail Real Estate — Jul 3, 2026
- Splitsville Bowl to Open at CF Sherway Gardens in Former Nordstrom Space — Jul 16, 2026
- Crombie REIT Reports Strong Rent Growth Driven by Grocery-Angled Retail — Aug 7, 2026
- Choice Properties Repositions Former Loblaw and Toys “R” Us Spaces Amid Strong Retail Leasing — Aug 11, 2026
- CT REIT Sees Tight Retail Property Market as Rents Rise — Aug 12, 2026
- Primaris Invests $19M to Transform Former Hudson’s Bay at Galeries de la Capitale — Aug 17, 2026
- Westcliff Open to Further Acquisitions Following Kingsway Mall Deal — Aug 31, 2026
- Canada’s retail vacancy rate expected to remain elevated as market absorbs Hudson’s Bay closures — Sep 10, 2026
- Canadian Retail Properties Perform Well in the First Half of 2026: CBRE — Sep 11, 2026
- Central Walk Details Redevelopment of Former Bay Spaces at Woodgrove and Mayfair — Sep 24, 2026
- Primaris Raises $200M With More Than $1B in Canadian Mall Acquisitions Under Negotiation — Sep 17, 2026
- Public safety and construction deal heavy blows to Edmonton downtown businesses — Aug 20, 2026
- Morguard Advances Mall Redevelopments as Retail Leasing Strength Continues Across Canada — Aug 13, 2026
- Centre Rockland Sold as Future Plans Unfold for Montreal Mall — Aug 11, 2026
- Westrich to Acquire and Redevelop Edmonton City Centre — Aug 11, 2026
