As part of Retail Insider Reports, this Q2 2026 Real Estate & Leasing Retail Report analyzes Canadian retail real estate and leasing trends. Drawing on Retail Insider coverage, REIT disclosures, industry research, and broader market signals, it identifies the key dynamics shaping leasing, redevelopment, capital allocation, and asset performance. 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.
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Canadian retail real estate has entered a scarcity-driven phase. Prime urban, open-air, necessity-based, and top regional assets continue to show strong leasing demand, limited vacancy, and rising rents, while many secondary malls face more difficult decisions around vacancies, legacy anchor space, capital requirements, and redevelopment timelines.
The quarter was defined by widening performance gaps and a growing scarcity of high-quality retail space. Well-capitalized landlords with strong assets are benefiting from constrained new supply, tenant demand for productive locations, and the expansion of necessity, value, food, service, and experiential tenants. International retailers also continue to view Canada as attractive, but their demand is increasingly concentrated in a small number of dominant retail nodes, luxury districts, and high-productivity shopping centres.
Despite economic uncertainty, retailers continue to invest in physical stores when they can secure productive locations, reinforcing the enduring appeal of high-quality Canadian retail real estate.
At the same time, the closure of Hudson’s Bay and related legacy department store space has created a major repositioning challenge across the country. The opportunity is significant, but it is complex, capital intensive, and uneven by market.
The result is not a uniform retail real estate recovery. It is a more selective market where scarcity, curation, capital access, location quality, tenant mix, and redevelopment flexibility increasingly determine winners and losers.
Market Context: Scarcity and Pricing Power Define Prime Retail
Recent REIT disclosures show that the strongest Canadian retail assets are benefiting from limited supply and strong tenant demand. RioCan reported record 25.8 per cent blended leasing spreads in Q1 2026, including 58.5 per cent new leasing spreads, along with 4.7 per cent commercial same-property NOI growth and 98.6 per cent committed retail occupancy. These results point to a market where high-quality retail space is scarce and landlords with strong portfolios are gaining pricing power.
SmartCentres also reported high occupancy, with in-place and committed occupancy of 97.6 per cent at March 31, 2026. The REIT later noted occupancy of 98.0 per cent, supported by value, necessity, grocery, and service-oriented retail. These figures reinforce the strength of open-air and necessity-based formats, particularly where retailers can access daily-needs traffic and established trade areas.
This context matters because it separates the strongest assets from the broader market. Canada is not seeing a broad oversupply of quality retail space. In many desirable locations, the challenge is the opposite: too little productive space, high construction costs, limited new development, and retailers competing for the best sites.
Very little new retail space is being built nationally relative to historical norms, largely because construction costs, financing conditions, and municipal approval timelines have made speculative retail development difficult. That scarcity is increasing the value of existing productive assets.
Broad Overall Themes
Canadian retail real estate in Q2 2026 is defined by a widening gap between high-performing prime assets and properties facing repositioning pressure.
- Scarcity is driving leasing power in prime assets. High occupancy, limited new supply, and strong demand from necessity, value, food, service, and experiential tenants are giving leading landlords greater pricing power.
- The market is polarizing. Top-tier malls, dominant open-air centres, grocery-anchored assets, and urban mixed-use nodes continue to attract capital and tenant demand, while many mid-tier and secondary malls face weaker productivity, anchor vacancy, and greater redevelopment complexity.
- Open-air retail is one of the clearest winners of the current environment. Centres anchored by grocery, pharmacy, discount, food service, medical, services, and other necessity-based uses continue to benefit from frequent visits, resilient tenant demand, and institutional investor interest.
- Curation is becoming a competitive advantage. Leading landlords are increasingly creating integrated retail ecosystems that combine shopping, food, hospitality, entertainment, wellness, public space, residential density, and cultural programming.
- International retailer demand remains concentrated. Global brands continue to see Canada as attractive, but expansion activity is focused on a limited number of productive urban districts, luxury corridors, and dominant shopping centres.
- Hudson’s Bay’s exit has created both opportunity and operational strain. Approximately 17 million square feet of HBC and related space has returned to the market, depending on scope. The release of former Hudson’s Bay space represents one of the largest merchandising resets in Canadian shopping centre history, creating both risk and opportunity for landlords and retailers.
- Subdivision is becoming the near-term solution for many large-format boxes. Rather than pursuing immediate wholesale redevelopment, landlords are often breaking former department store spaces into multi-tenant configurations, creating units that can attract value, entertainment, grocery, services, fitness, food, and specialty operators.
- Necessity and value tenants are absorbing demand. Grocery, pharmacy, discount, food service, services, wellness, medical, fitness, and entertainment tenants are increasingly important to leasing momentum and traffic generation.
- Mixed-use redevelopment remains strategic, but timelines are stretching. Housing market softness, weaker condo pre-sales, high construction costs, financing pressure, and municipal complexity are slowing some mall redevelopment plans.
- Capital scale is becoming a competitive moat. Landlords with liquidity, unencumbered assets, development expertise, and portfolio flexibility are better positioned to reposition assets, pursue acquisitions, and absorb near-term income disruption.
- Secondary-market investment remains relevant. While capital and retailer demand are concentrated in top urban and suburban assets, value-add investors continue to look at regional malls and secondary markets where repositioning, leasing upside, and residential intensification may create long-term opportunity.
- Community and experience remain important differentiators. Centres that connect to local demographics, cultural programming, food, entertainment, recreation, and services are better positioned to maintain relevance beyond traditional shopping.
Retail Insider Coverage
Prime Assets Lead a Polarized Market
Retail Insider’s coverage of Canadian shopping centre performance shows a wide gap between the country’s top-performing malls and the broader market. Top-tier centres such as Yorkdale Shopping Centre continue to generate exceptional sales productivity, while many mid-tier centres remain far below that level.
Recent shopping centre productivity data further illustrates the widening gap between top-tier assets and the rest of the market. Yorkdale generated $2,368 per square foot in 2025, exceeding the next closest Canadian shopping centre by more than $700 per square foot.
This divide reflects a broader shift in retailer strategy. Many brands are concentrating investment in fewer, more productive locations that offer stronger demographics, tourism, transit access, luxury adjacencies, food, entertainment, and brand visibility. The result is a flight to quality among both retailers and landlords.
International retailer demand reinforces this pattern. Retail Insider’s annual market entry study found that 20 international retailers entered Canada in 2025, with 70 per cent choosing Toronto for their first location. Activity clustered around Yorkdale Shopping Centre and the Bloor-Yorkville corridor, reinforcing the competitive advantages enjoyed by Canada’s most productive retail ecosystems.
For top assets, this creates a virtuous cycle. Strong tenant demand supports better merchandising, stronger sales, higher rents, and continued reinvestment. For weaker assets, the opposite risk emerges.
This is the barbell structure defining Canadian retail real estate: luxury, value, necessity, and experience continue to perform, while undifferentiated middle-market retail space faces more pressure.
Curation and District Creation Become Competitive Advantages
The strongest landlords are increasingly acting less like passive space providers and more like curators of retail ecosystems.
In Toronto, Bloor-Yorkville continues to demonstrate how luxury retail, hospitality, food, residential density, and streetscape improvements reinforce one another. Yorkdale remains the country’s most productive enclosed shopping centre because it combines luxury, fashion, food, entertainment, tourism, and merchandising discipline in a tightly curated environment.
In Vancouver, Oakridge Park shows how curation is becoming central to large-scale development. The project combines luxury retail, residential density, office space, public amenities, food, cultural programming, and rapid transit access within a single mixed-use ecosystem.
In Montreal, Mount Royal Village and other curated urban retail environments demonstrate how ownership control and district-level strategy can shape a retail area’s identity over time.
This shift matters because the best retail real estate is increasingly managed as a place rather than a collection of leases.
Hudson’s Bay Space Creates Opportunity and Complexity
The closure of Hudson’s Bay has released one of the largest blocks of retail space in modern Canadian history.
For landlords, the exit of a legacy anchor can be painful in the short term. However, it also gives landlords rare control over large-format boxes, some of which were governed by restrictive legacy leases and covenants.
The opportunity is to subdivide, reposition, and remerchandise space for tenants better aligned with current demand. Rather than waiting years for major redevelopment, landlords can create more flexible retail boxes for uses such as grocery, off-price, fitness, entertainment, medical, food halls, value retail, and specialty retail.
The Walmart announcement for the former Hudson’s Bay space in Ottawa illustrates how some large boxes can be backfilled by strong national retailers with traffic-generating potential.
The pace at which several former Hudson’s Bay locations have already attracted replacement tenants demonstrates that well-located retail space remains in demand, even when the boxes themselves require significant repositioning.
For many landlords, subdivision is becoming an exercise in incremental value creation rather than transformative redevelopment. A former department store may become several productive tenant spaces rather than a single replacement anchor.
The strongest results will occur where the broader centre has solid traffic, demographics, capital support, and leasing demand. Weaker centres may face a longer and more difficult path.
Open-Air and Necessity-Based Retail Continue to Outperform
Open-air retail formats anchored by grocery, pharmacy, discount, food service, and services continue to outperform many weaker enclosed assets.
SmartCentres’ high occupancy and Choice Properties’ planned acquisition of First Capital assets both reinforce the institutional appeal of necessity-based retail. These assets benefit from frequent visits, durable tenant demand, and categories less exposed to discretionary volatility.
Grocery has become one of the most valuable uses in Canadian retail real estate because it provides frequency, supports surrounding tenants, and remains attractive to institutional investors. Pharmacy, services, medical, fitness, and food uses can further strengthen the daily-needs profile of these centres.
This does not mean enclosed malls are obsolete. Top enclosed assets remain among the most powerful retail platforms in the country. However, the open-air and necessity-based segment continues to offer attractive defensive characteristics at a time when retailers and investors are prioritizing productivity, traffic, and resilience.
Necessity, Value, Food and Services Drive Leasing Demand
Leasing demand is increasingly concentrated in categories that generate frequency, solve everyday needs, or create experience.
Entertainment and recreation tenants are becoming more important components of merchandising strategies because they generate repeat traffic, extend dwell time, and support placemaking objectives.
This shift reflects changing consumer priorities. Shoppers continue to visit physical retail, but the reasons for visiting have evolved. Daily needs, value, food, social activity, services, and experience are increasingly important.
For landlords, leasing strategy is no longer simply about filling space. It is about building a tenant mix that generates repeat visits, supports dwell time, and creates durable traffic.
Redevelopment Slows, but Mixed-Use Remains the Long-Term Strategy
Mixed-use redevelopment remains one of the most important long-term strategies for Canadian retail real estate, but the timeline has become more difficult.
Several mall redevelopment projects have faced delays, cancellations, or strategic resets due to high construction costs, financing pressure, weak condo pre-sales, municipal complexity, and broader economic uncertainty.
Oakridge Park remains one of the clearest examples of the long-term direction of Canadian retail real estate. The approximately $5 billion to $6 billion project combines luxury retail, residential density, office space, public amenities, food, and cultural programming within a highly transit-oriented environment.
Oakridge also demonstrates the growing importance of destination creation. Retail, food, hospitality, public space, culture, office uses, and residential density are being designed as a single ecosystem rather than a conventional shopping centre with development layered around it.
This does not mean mixed-use retail redevelopment is no longer viable. It means the easy version of the story is over. Projects now require stronger phasing, deeper capital, better municipal alignment, and more conservative assumptions.
Capitalized Landlords Gain a Competitive Advantage
Capital strength is becoming one of the clearest differentiators in Canadian retail real estate.
Choice Properties’ planned acquisition of approximately $5.0 billion of First Capital retail assets underscores the institutional value of necessity-based urban retail. RioCan’s liquidity and substantial unencumbered asset base further illustrate the advantage of capital flexibility.
Capital flexibility is increasingly becoming a strategic advantage in itself. The ability to fund redevelopment, provide tenant allowances, pursue acquisitions, and absorb temporary income disruption may determine which landlords can fully capitalize on the opportunities emerging from market dislocation.
Secondary-market acquisitions also remain part of the picture. Smart Investment Group’s acquisition of McAllister Place in Saint John, following its Garden City acquisition in Winnipeg, shows that private capital continues to see opportunities outside Canada’s largest urban markets where repositioning, leasing upside, and long-term intensification potential may exist.
The gap between capitalized landlords and smaller or more constrained owners is likely to widen.
Community Strategy Supports Asset Relevance
Community-focused programming is becoming a useful tool for retail centres seeking to maintain relevance.
Programming, food, cultural events, local partnerships, recreation, and services are increasingly important competitive differentiators in diverse urban markets.
The most resilient centres will be those that give local consumers reasons to return beyond transactional shopping.
Editor’s Take
Q2 2026 confirms that Canadian retail real estate has entered a scarcity-driven phase. The best assets are not simply recovering; they are gaining pricing power.
The market is also becoming more polarized. Top regional malls, necessity-based open-air centres, grocery-anchored urban assets, and mixed-use retail nodes are attracting tenant demand and capital. Open-air centres anchored by grocery, pharmacy, discount, food, and services may be among the biggest beneficiaries of the current environment.
International retailer demand further reinforces the scarcity story. New entrants continue to choose a relatively small number of high-productivity Canadian retail nodes, particularly Toronto’s strongest malls and luxury districts. Recent shopping centre productivity data also shows how far the best assets have pulled ahead.
The closure of Hudson’s Bay has accelerated this divide. For landlords with strong locations and capital, former Bay boxes represent a rare chance to regain control, remove legacy constraints, subdivide space, and bring in more relevant tenants.
The most important near-term strategy is likely subdivision rather than full redevelopment. Large-scale mixed-use redevelopment remains important, but housing market softness and construction costs mean timelines will stretch.
Recent commentary from Primaris further suggests that some of Canada’s strongest enclosed mall owners continue to see significant embedded value in their portfolios despite near-term market challenges.
Curation is becoming one of the industry’s most important competitive advantages. The best landlords are not simply filling vacancies. They are building ecosystems around retail, food, services, hospitality, culture, entertainment, public space, and residential density.
Oakridge Park demonstrates that the long-term future of retail real estate is not simply more shopping centres, but highly integrated mixed-use districts that combine retail with residential, office, culture, and public space.
Canadian retail real estate has largely moved beyond recovery and into a scarcity-driven phase characterized by selective growth, constrained supply, district curation, and widening performance gaps between prime and secondary assets.
Looking ahead, the key indicators will be leasing spreads, former HBC backfill progress, the pace of box subdivision, mixed-use redevelopment delays, grocery and value tenant expansion, international retailer demand, and institutional appetite for necessity-based retail assets.
Scarcity, location quality, capital access, curation, and execution are increasingly becoming the defining competitive advantages in Canadian retail real estate.
Selected Articles
- Top Canadian Shopping Centres by Sales Per Square Foot in 2025 – Craig Patterson – 2026-04-17
- Primaris REIT Repurposing Malls After Hudson’s Bay Closures – Craig Patterson – 2026-05-05
- Food and Experiential Retail Drive Toronto Leasing – Craig Patterson – 2026-04-06
- Cadillac Fairview Dominates Canada’s Top-Performing Shopping Centres – Craig Patterson – 2026-04-29
- Canada’s Mall Redevelopment Boom Hits a Wall – Craig Patterson – 2026-04-14
- Oakridge Park in Vancouver Announces Opening Date – Craig Patterson – 2026-05-11
- Scarborough Town Centre Growth Driven by Community Strategy – Craig Patterson – 2026-05-12
- Canadian Shopping Centre Performance Trends (2023–2025) – Craig Patterson – 2026-04-17
- How Cadillac Fairview Drives Shopping Centre Productivity – Craig Patterson – 2026-05-05
- Canadian retail resets as 17 million square feet returns to market – Mario Toneguzzi – 2026-04-29
- Woodbine Mall CCAA Signals Shift to Redevelopment – Craig Patterson – 2026-04-27
