Canadian retail sales surge despite economic uncertainty: JLL

Canadian retailers are experiencing an unexpected surge in discretionary spending during the first half of 2025, defying subdued consumer confidence and economic uncertainty. According to JLL’s latest Canada Retail Market Dynamics report, discretionary goods sales have accelerated significantly compared to 2024, driven by the “Buy Canadian” movement and resilient back-to-school shopping patterns.

Key points:

• Discretionary Spending Surprise: Despite economic headwinds, Canadian consumers increased spending on jewelry (up 16% year-over-year), furniture, and luxury goods, suggesting stronger-than-expected holiday season potential.

• Historic Supply Shortage: Canada’s retail development pipeline has shrunk to historic lows, with Vancouver and Toronto posting some of the tightest availability rates in North America at just 1.8% and 1.6% respectively.

• “Buy Canadian” Movement: Grocers report shifted consumer behavior with shelves now prominently featuring “Made in Canada” tags, as retailers leverage local suppliers to navigate U.S. trade tensions.

• Experience-Driven Expansion: Dining, entertainment, and fitness services comprise over 50% of new store announcements in H1 2025, with dining alone accounting for more than 40% of retail expansion.

“The broader economic outlook for retail is cautious. While earlier interest rate cuts provided relief and drove discretionary spending, the economy is now facing headwinds from the trade dispute with the U.S., a recent contraction in GDP, and rising unemployment,” said the JLL report. “After maintaining positive momentum through the rest of 2025, sales growth for retail and food services is projected to slow in 2026 due to these headwinds before accelerating again as the situation stabilizes in 2027.

“Retail real estate market conditions remain favourable for landlords, as tenants are taking longer to find quality retail spaces. Landlords hold leverage in negotiations, can be selective with tenants, and can command higher rents while maintaining high occupancy. However, there are signs of market softening, and rental growth has now fallen below the historical average.

“New supply will remain constrained for the foreseeable future. New construction has fallen to a historic low, and the demolition of older malls has kept available space tight at just 2.2 percent. Additionally, landlords are considering the redevelopment of spaces formerly occupied by Hudson’s Bay for residential use, removing retail inventory,” added JLL.

“Dining accounts for the most notable site searches across major markets, suggesting that the momentum for restaurant openings will continue. Just as retail sales per capita are expected to rise, restaurant spending per capita is set to increase in the next few years.”

More from Retail Insider:

• Food services sales up 0.1% in July: Statistics Canada
• Retail decline limits Canada’s July GDP growth: Statistics Canada