Although retail values are still down 9.3% compared to pre-pandemic levels (1Q 2020), the sector has seen positive momentum over the past year with Q1 values that rose 0.74% compared to Q4 and 4.1% compared to Q1 2024, according to Altus Group’s new quarterly Canadian Commercial Real Estate (CRE) Valuation Analysis.
According to Altus Group’s Investment Trends Survey Q1 2025 results, food-anchored retail strips topped the list of the most sought-after property types, continuing a trend established in 2024.
“This enduring appeal reflects the ongoing emphasis of Canadian consumers on essential goods and services, making tenants in these centres, such as grocery stores and general merchandise retailers, relatively resilient to economic fluctuations,” said the report.
According to the Product/Market barometer, the top three preferred combinations were:
- Food-anchored retail strip in Vancouver
- Food-anchored retail strip in Calgary
- Food-anchored retail strip in Montreal
The Altus Valuation Analysis report said: “The food-anchored retail strip remains the preferred investment by a wide margin. Investors like the stability in foot traffic and sales. The obstacle to investment is the limited inventory of those assets for sale. Owners are choosing to hold onto those assets because they are performing well. First quarter retail sales across all types of retail assets reached $1.37 billion, which was well ahead of office but trailed sales volume in both industrial at $1.85 billion and multifamily residential at $1.60 billion.”
“The challenge for retail is the health of the consumer going forward. If we go into a recession, what does that mean for the fundamentals in the retail space?” said Robert Santilli, Director, National Accounts, Altus Group.
Those concerns are another reason driving demand for more resilient food-anchored retail.
Santilli said retail has outperformed the other asset classes. There’s very positive sentiment around retail investment going forward, particularly food-anchored retail.
Alice Dale, Senior Director, Valuation Advisory, and Retail Practice Group Lead, Altus Group, said it really comes down to supply and demand dynamics being more in balance compared to other asset classes.
“We haven’t had a regional mall built in a number of years. There are other issues we can talk about with regional malls, but construction costs have limited development to mostly food-anchored retail,” she said. “Land availability and cost to build are key factors—so the inventory is right-sized for the demand in that space. That’s why that asset class is performing better than enclosed retail spaces. The food anchor remains the draw. Service-based tenants in those centres benefit from that.
“So, if you’re a pharmacy or a tenant adjacent to a grocery anchor, you’ll benefit from that traffic. And that really amplified following the pandemic. People prefer to shop that way for necessities.”
Consumers are challenged these days with the cost of living and rising prices.
Dale said the impact depends on the type of retailer and the composition of the tenant mix within shopping centres.
“Needs or necessity-based tenants are still going to attract people. You might see a shift away from more discretionary spending—luxury categories—back to necessity-based categories,” she added.
“Not just luxury, but also entertainment and food. Those tenants could be strained going forward because their input costs are expected to rise as well. So, low consumer confidence leads to reduced discretionary spending. Food and hospitality—like restaurants—are sectors to watch. People will return to needs-based shopping.”
Santilli said secondary retail in secondary markets is the most challenged from an investment perspective. It’s most impacted by big-box departures—like the recent news in the retail landscape.
“Urban retail, where there’s foot traffic, is performing strongest,” he said.
‘Looking ahead at economic forecasts, Alberta will likely still outperform, despite the energy sector being impacted by tariffs. Ontario’s economic growth projections are fairly muted, so it’s on the watch list. Slow growth isn’t good for any asset class,” added Dale. “Vancouver continues to be a very sought-after investment market. Supply is fairly right-sized, and there’s a lot of foreign interest in that market. Underlying land values are also very high.”
Santilli said Alberta, particularly Calgary, is showing the strongest economic performance in Canada right now. A lot of that has to do with interprovincial migration. The population there is growing, and incomes are higher—so people can spend more. That’s positive for retail.”
Key overall highlights from the Altus report:
- Across the four main property types, valuation movement was relatively muted with retail outperforming other sectors, up 4.08% compared to a year ago, followed by residential at 1.13%
- Industrial values were largely flat on a 12-month basis, moving up 0.40%
- Office valuations have shown signs of stabilizing over the past year with Q1 values that dipped a slight 0.48% over the prior quarter and -4.02% on a year-over-year basis
- The outcome of trade policy could set the direction of valuations for certain property sectors and create more bifurcation in the market between stronger and weaker assets
- Overall, investment sales volume has slowed this year, dropping from $8.5 billion in Q1 2025 compared to $10.2 billion in Q1 2024 and $12.3 billion in Q1 2023
“Will tariffs and the US versus Canada trade war change the trajectory of commercial real estate and multifamily valuations? Although overall fundamentals remain relatively stable, uncertainty is clouding the near-term outlook for valuations across property sectors,” said the report.
“Altus Group’s latest valuation data shows that Canadian commercial and multifamily values stayed the course in the first quarter. Across the four main property types, valuation movement was relatively muted with retail outperforming other sectors, up 4.08% compared to a year ago, followed by residential at 1.13%. Industrial values were largely flat on a 12-month basis, moving up 0.40% and office was the only sector that saw a year-over-year decline of 4.02%.
“The broader trendline shows less volatility and more stability in values over the past five consecutive quarters. Even office, although still choppy, is experiencing more modest valuation moves compared to the bigger declines that occurred in 2022 and 2023.”
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