Primaris REIT has increased its long-term leasing commitments for former Hudson’s Bay department stores to approximately 728,000 square feet, advancing a redevelopment program expected to generate substantially higher rental income across its Canadian shopping centre portfolio.
The figure, disclosed in the company’s third-quarter 2026 results on October 28, compares with approximately 608,500 square feet in June. Including space in advanced negotiations, Primaris has leasing agreements or discussions covering approximately 882,000 square feet, although some commitments remain conditional.
That space could eventually generate approximately $15.1 million in annual net rent, compared with roughly $3.75 million previously paid by Hudson’s Bay for the same premises. The projected fourfold increase depends on completing outstanding agreements, redeveloping the properties and bringing replacement retailers into operation.
The program is progressing as Primaris expands its portfolio through acquisitions, including Upper Canada Mall in Newmarket, Ontario, while selling interests in properties it considers less central to its long-term investment strategy.
Former Hudson’s Bay Spaces Offer Higher Rental Potential
Primaris is repositioning 10 former Hudson’s Bay locations containing approximately 1.23 million square feet. The premises previously generated $5.1 million in annual minimum rent, or approximately $4.18 per square foot.
The redevelopment plans involve subdividing former department stores, creating new common areas and, in some cases, partial demolition. Approximately 77,800 square feet is designated for common space and 92,000 square feet for demolition, leaving about 1.06 million square feet of planned leasable area.
Long-term leasing agreements, including conditional commitments, cover approximately 728,000 square feet. With advanced negotiations included, the total reaches 882,000 square feet, representing 84% of the planned leasable space.
The overall 84% figure has changed little since June, when Primaris reported approximately 881,400 square feet leased or in advanced negotiations. The more significant development is the approximately 119,500-square-foot increase in long-term leasing commitments.
Primaris estimates the completed program could generate $19.45 million in annual net rent. Including recovery of approximately $3.6 million in operating expenses currently absorbed by the landlord, management projects about $23 million in stabilized annual cash net operating income.
The company expects to invest $175 million to $225 million over approximately two to three years to complete the redevelopment program. The rental projections represent anticipated future income, with construction schedules, tenant possession dates and outstanding leasing negotiations affecting when those revenues begin.
During the October 29 earnings call, management discussed an expected yield of approximately 10% on investments associated with the former Hudson’s Bay redevelopment program. The projected return reflects the opportunity to replace historically low department-store rents with higher-paying tenants, although the ultimate results will depend on redevelopment costs, completed leasing agreements and when replacement retailers begin paying rent.
Primaris also expects the replacement of former department stores with new retail anchors to create opportunities elsewhere in its shopping centres. Management believes the incoming retailers could generate additional customer traffic and support leasing activity in adjoining storefronts, although those benefits have not yet been quantified.
Walmart and Other Retailers Take Former Department-Store Space
Walmart Canada is among the confirmed replacement tenants, having leased approximately 115,500 square feet of former Hudson’s Bay space at Place d’Orléans in Ottawa. As Retail Insider previously reported, the retailer plans to open a two-level Supercentre in 2027, offering groceries, general merchandise, pharmacy services and online order pickup.
At Promenades St-Bruno in the Montreal region, Primaris is exploring a food hall redevelopment. The approximately 130,600-square-foot former Hudson’s Bay premises are partly occupied under short-term leasing arrangements while longer-term plans advance.
The company is also redeveloping former department-store space at Galeries de la Capitale in Quebec City. Retail Insider reported in August that Primaris was investing $19 million to convert approximately 163,000 square feet into a multi-tenant retail and restaurant wing, including a planned 30,500-square-foot Imaginaire store.
Primaris has reported interest from grocery, pharmacy, sporting goods and other national and international retailers. The redevelopment approach varies by property, depending on the available space, prospective tenants and construction requirements.
During the October 29 earnings call, Primaris President and Chief Operating Officer Patrick Sullivan also pointed to expansion interest from several major retailers. He described strong participation by American retailers at the recent ICSC conference in Toronto, identifying Victoria’s Secret, Bath & Body Works and American Eagle’s Aerie banner among those pursuing additional Canadian locations.
Sullivan also highlighted continued interest from Uniqlo and said Primaris is working on several expansion opportunities with Aritzia.
Rental Income Expected to Increase Through 2028 and 2029
During the company’s October 29 earnings call, President and Chief Operating Officer Patrick Sullivan discussed the construction and municipal approval requirements affecting replacement tenant openings. Some former Hudson’s Bay locations require extensive subdivision before retailers can take possession.
Sullivan indicated that a portion of the space should be occupied by the end of 2027, while many tenants are expected to open during 2028. The timing will vary according to construction and municipal approvals.
Chief Executive Officer Alex Avery also addressed the timing of rental income, including differing lease commencement dates and rent-free periods. Management expects some additional cash rent in 2027, with a larger contribution beginning in 2028 and continuing to grow in 2029.
The timetable means that leasing commitments will translate into occupied premises and rental income over several years. Primaris will incur substantial redevelopment costs before the full anticipated income is realized.
Leasing Activity Strong Despite Lower Portfolio Occupancy
Primaris completed 177 leasing transactions covering approximately 617,000 square feet during the third quarter. These included 130 commercial retail unit transactions involving approximately 274,000 square feet, with average net rents of $52.60 per square foot.
The company reported a weighted average renewal rental spread of 12.7% across approximately 356,000 square feet. Renewal spreads were 14.4% for commercial retail units and 7.2% for larger premises.
Sullivan cautioned that the quarterly renewal spread was unusually strong and should not be treated as a consistent future rate. Management considers mid- to high-single-digit renewal spreads a more reasonable expectation, with results varying according to the leases expiring in each period.
Portfolio in-place occupancy stood at 87.7% at September 30, down from 91.8% a year earlier, while committed occupancy was 90.9%. The company attributed the decline partly to former Hudson’s Bay vacancies and changes in its portfolio.
Same-property in-place occupancy was 90.3%, compared with 90.2% at the end of 2025. Same-property cash net operating income increased 3.1% during the quarter, while funds from operations per diluted unit rose 5.6% to $0.468.
Primaris also reported tenant sales productivity of $826 per square foot for the 12 months ending August 2026, up 2.5% from the comparable period. The figures provide context for the leasing demand across its established shopping centres.
Upper Canada Mall Adds Redevelopment Opportunities
Primaris completed its $411 million acquisition of Upper Canada Mall in Newmarket, Ontario, on October 15. The approximately 990,000-square-foot regional shopping centre has reported annual sales productivity of $888 per square foot, with retailers including Apple, Aritzia, Browns, Lululemon, Sport Chek, Uniqlo and Winners.
The acquisition, previously covered by Retail Insider, includes approximately 142,800 square feet of former Hudson’s Bay space and 47,600 square feet previously occupied by Toys “R” Us, both under leasing negotiations. Another 73,000 square feet of former Sears space is committed to two national retailers.
Upper Canada Mall’s former Hudson’s Bay premises are excluded from the 10-property redevelopment figures in Primaris’s third-quarter results. The acquisition also includes approximately 33,800 square feet of vacant smaller retail units and more than six acres of land with potential for future development or monetization.
Grant Park and Cataraqui Sales Support Portfolio Strategy
Primaris has agreed to sell its remaining 50% managing interest in Grant Park Shopping Centre in Winnipeg for approximately $44.4 million. The transaction involves a roughly 398,940-square-foot property owned in partnership with Montez Corporation.
The sale is expected to close in December, with the purchaser not publicly identified. Management considers Grant Park non-core despite its full occupancy, citing comparatively lower retail sales productivity.
Primaris is also selling its remaining 50% managing interest in Cataraqui Centre in Kingston, Ontario, for approximately $41.8 million, with closing expected by January 6, 2027, subject to customary conditions and approvals. The transaction has not yet closed.
As Retail Insider previously reported, Cataraqui Centre had approximately 67% in-place occupancy, including a substantial vacancy associated with the former Hudson’s Bay store. The property is excluded from Primaris’s current 10-site redevelopment program.
The two pending transactions represent approximately $86.2 million in combined consideration before transaction costs. Together with the Upper Canada Mall acquisition, they reflect Primaris’s emphasis on investing in regional shopping centres with stronger sales productivity and leasing opportunities.
Redevelopment Spending to Continue in 2027
Primaris has introduced 2027 guidance calling for same-property cash net operating income growth of 3% to 5%, funds from operations of $1.93 to $1.99 per unit and redevelopment capital expenditures of $160 million to $180 million. The capital expenditure guidance covers the broader portfolio, rather than only the former Hudson’s Bay program.
During the October 29 earnings call, Chief Financial Officer Rags Davloor indicated that approximately half of the projected 2027 redevelopment spending relates to the former Hudson’s Bay program. Other projects, including work at Promenades St-Bruno and Kildonan Place, also contribute to the planned expenditures.
Management expects portfolio in-place occupancy to reach 88% to 90% by the end of 2027 and has established a longer-term target of 96%. Achieving those levels will depend partly on delivering redeveloped space and bringing new retailers into operation.
For the former Hudson’s Bay program, the immediate work involves finalizing outstanding leases, completing construction and preparing premises for incoming tenants. Some replacement stores are expected to open in 2027, with more of the projected rental income contributing during 2028 and 2029.
