Retail Insider has released Q3 2026 Real Estate & Leasing: Strong Leasing Faces the Test of Delivery, authored by Retail Insider founder and publisher Craig Patterson. The report examines why high occupancy and replacement leases tell only part of the story as former department stores move through redevelopment.
The report covers Canadian retail property, leasing, shopping centres, mixed-use projects, landlords, tenants and commercial redevelopment. Drawing on Retail Insider coverage, landlord disclosures, industry research and government data, it separates committed space from operating space and distinguishes quarterly developments from earlier financial results and longer-term forecasts.
Retail Insider Reports provide executive-level analysis of the sectors and business issues shaping Canadian retail. The Retail Insider Report Hub brings the quarterly collection together, connecting property decisions with retailer performance, market conditions and the economics behind investment.
General Themes
- Property types face different markets: Tight necessity-oriented centres can coexist with substantial enclosed-mall vacancies.
- Signed leases are not current income: Possession, opening and rent commencement may occur at different times.
- Anchor replacement requires capital: Subdivision, building systems, access and tenant fit-outs shape the return on higher rents.
- Leasing statistics need definitions: Renewal terms and changes in leasable area can materially affect reported measures.
- Delivery is the next test: Openings, cash rent, tenant performance and redevelopment returns will establish whether leasing progress becomes productive property.
Retail Insider Coverage
Choice Properties, Crombie and CT REIT reported strong Q2 results in necessity-oriented portfolios, with occupancy measures of 97.4, 97.5 and 99.5 per cent respectively. Their definitions and tenant concentrations matter: Crombie’s committed occupancy exceeded its 96.6 per cent economic occupancy, while Empire supplied 61.5 per cent of annual minimum rent. CT REIT depends heavily on Canadian Tire. At Choice, converting former Loblaw space for Shoppers Drug Mart and GoodLife still required staged possession, and a Laval property needed rezoning. Strong portfolio averages do not remove project-level delivery work.
Primaris more directly illustrates the distance between a signed lease and current income. At Q2-end it reported 86.6 per cent in-place occupancy against 91.1 per cent committed occupancy, with approximately 600,000 square feet of former Hudson’s Bay space leased. Occupancy dates extend from early 2027 through mid-2029. Expected replacement net rent of approximately $17 per square foot compares with roughly $4 previously, but the redevelopment requires an estimated $175 million to $225 million. Higher rent must be assessed alongside that capital and the wait before income begins.
Former anchors are increasingly becoming several destinations rather than another single department store. At Galeries de la Capitale, Primaris’s approximately $19-million conversion includes Imaginaire and ZIBO!, with openings expected progressively through 2027; Imaginaire’s own approximately $2-million investment is separate. Central Walk’s Vancouver Island projects involve roughly 310,000 square feet, with major uses targeted for 2028 subject to approvals. Woodgrove’s combined landlord and tenant investment is expected at $30 million to $40 million, not all landlord expenditure. At CF Sherway Gardens, Splitsville’s planned 34,000-square-foot venue represents only part of the former Nordstrom reuse.
Capital continued moving into the sector through ownership and financing activity. The $9.4-billion First Capital transaction involving KingSett and Choice had received court approval in late June, while Westcliff acquired Kingsway Mall and Jadco acquired the entity holding Centre Rockland. The latter acquisitions did not come with newly announced comprehensive redevelopment plans. Primaris also raised approximately $200 million while reporting more than $1 billion in potential acquisitions under negotiation. Financing capacity and negotiations should not be treated as completed acquisitions or operating income.
Edmonton City Centre shows why long-term redevelopment and current trading conditions need separate attention. A court approved Westrich’s proposed acquisition in August, with initial plans for approximately 1,500 homes, street-oriented retail and a rooftop Nordic spa, while details and timing still required work and approvals. Downtown businesses were meanwhile reporting safety, vandalism, parking and construction-access concerns. Those accounts do not establish a single cause of closures, and future residents cannot resolve the immediate access needs of existing merchants.
Broader Industry Coverage
CoStar’s national evidence provides a counterweight to near-full portfolios. Overall retail vacancy was around 2.5 per cent after Hudson’s Bay closures, while shopping-mall vacancy had risen to approximately 8 per cent in Q2 2025. Its forecasts anticipate persistent mall vacancy and moderating rent growth, not an already realized outcome. CBRE’s first-half survey likewise found different rental conditions across formats and locations. Statistics Canada’s Q2 retail sales growth of 2.2 per cent in dollars but 0.4 per cent in volume adds context, without establishing sales at individual properties.
Large renewal increases also require lease history. RioCan’s example of a GTA grocery lease doubling reflected a rent last negotiated at market approximately 30 years earlier, not a one-year doubling of market rents. Choice’s 12.4 per cent average Q2 renewal spread rose to approximately 20 per cent when fixed-rate options were excluded. Occupancy can also change when redevelopment removes space from the denominator, as Morguard’s Cambridge project illustrates. Committed, in-place and economic occupancy answer different questions and should not be used interchangeably.
Strong leasing can coexist with development risk in the same portfolio. SmartCentres reported 98.1 per cent in-place and committed occupancy while recording a $196.2-million fair-value loss on investment properties linked to market conditions and anticipated construction timing, partly offset by other valuation changes. Choice and RioCan also described weaker conditions for selling residential density. Long-term development potential can have value without contributing to current rental income, and Primaris’s stated approach is to monetize suitable excess land rather than become a residential developer.
Editor’s Take
The report identifies a practical checklist for landlords, retailers and investors. Capital requirements, possession, construction access, fit-out work and neighbouring openings belong alongside the headline rent. For landlords, the question is how quickly committed leasing becomes income. For retailers, a signed agreement must lead to a workable opening and a trading environment that supports the store.
The next several years will provide the delivery test. Former Hudson’s Bay tenants in the Primaris portfolio begin taking occupancy in 2027, Splitsville targets fall 2027, and major Central Walk uses are expected in 2028. These remain project timelines rather than evidence of stabilized performance. Necessity-oriented portfolios face a different test of maintaining strong occupancy as national rent growth is forecast to moderate.
The redevelopment cycle is changing the function of former department-store space. Grocery, restaurants, entertainment and specialty retail may create more reasons to visit, but each use brings different building needs, capital requirements and opening schedules. The most revealing numbers will follow the leasing announcement: stores opened, rent commenced, tenant sales and the return earned on the money invested.
Conclusion
Read the full Q3 2026 Real Estate & Leasing report for the analysis of occupancy, anchor conversions, property transactions and redevelopment economics. It explains why leasing progress must be assessed alongside delivery and cash flow.
The report and the wider quarterly collection are available through the Retail Insider Report Hub. The collection connects Canadian property developments with the broader retail conditions that influence tenant demand and investment returns.
