Retail is showing signs of a supercycle after years of concern that e-commerce would weaken physical stores. Limited new supply and renewed tenant demand have broadened interest beyond necessity-based and grocery-anchored properties, according to the Emerging Trends in Real Estate 2027 report from PwC Canada and the Urban Land Institute (ULI).
The PwC report said there is a positive outlook for the market despite the increasingly challenging consumer situation.
Key findings:
- Despite increasingly challenging consumer economics, the retail real estate community remains largely upbeat in their outlook for the year ahead;
- After years of undersupply and fewer store closures in 2026, retail fundamentals are in a strong place to weather any challenges 2027 may bring;
- With open-air centres largely focused on value, malls increasingly dominated by luxury and experience, and little left in the middle, the shopping center environment already mirrors the K-shaped economy.
Entering the final months of 2026, consumers appeared to be in an increasingly precarious position. But while consumers might be increasingly dour in temperament, the real question is are they continuing to show up?
The PwC report noted a comment from the head of retail research for one global brokerage firm who said: “I’ve never seen a bigger disconnect between consumer economic indicators and retail real estate in my career. Ultimately, one drives the other, but there are a lot of reasons for a bullish property outlook despite the consumer economy currently.”
Concern about the state of the consumer economy
“In our interviews this year, we came across near-universal concern as to the state of the consumer economy in both the United States and Canada, with most respondents anticipating economic conditions likely to get worse heading into late 2026 and early 2027. Yet, confidence in current retail real estate fundamentals was also a universal response,” it said.
While the market will likely end 2026 with fewer closures, store openings are also declining. Coresight predicts store closings to outpace openings by 2,500 to 2,800 storefronts. Data from the tenant tracking database The Brown Book support that thesis. That firm, which tracks the growth and contraction plans of more than 20,000 concepts active across United States and Canada reports that planned new store openings for 2026 are down roughly 15 percent against 2025, added the report.
“The retail platform leader for a brokerage active across the United States and Canada told us, “On both sides of the border we have seen growth concepts taking a more conservative approach to expansion. Some of this reflects uncertainty in the economy, but we are also seeing the impact of new artificial intelligence (AI) data tools in site selection. It’s more about quality than quantity now. In the long run, I expect fewer chains to open stores in locations that don’t pan out.”
The report said a chief economist for one brokerage told PwC: “We see retail continuing to perform well in 2027, though we expect fundamentals to continue to soften. Despite this, we see it outperforming across most of the potential scenarios we have game planned, including a garden variety recession. Likewise, we see retail, especially grocery-anchored shopping centers, remaining at or near the top of most investor wish lists even as industrial and multifamily investments increasingly regain their mojo. But anything beyond a mild downturn or if the economy were to experience a black swan event, all bets are off”.”
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