CT REIT says strong Canadian retail real estate fundamentals are increasing competition for quality properties, with high occupancy and rising rents supporting values across the sector.
The Canadian Tire-backed real estate investment trust ended the second quarter of 2026 with occupancy of 99.5% and completed more than 618,000 square feet of lease renewals at a blended rental increase of 10.4%. Canadian Tire store renewals accounted for approximately 515,000 square feet at a 10.9% increase, while roughly 103,000 square feet involving other tenants generated an 8.3% increase.
Those conditions are also making acquisitions more competitive. President and CEO Kevin Salsberg told analysts that relatively little property is currently being marketed that fits CT REIT’s investment strategy, which includes Canadian Tire stores, single-tenant properties and strategically located assets near sites the REIT already owns.
Salsberg described retail fundamentals as strong, but said they have contributed to increased competition and elevated pricing for investment properties. CT REIT is remaining selective while evaluating acquisitions, development opportunities and properties that could eventually be transferred from Canadian Tire Corporation.
Retail Space Remains Tight Across Canada
CT REIT’s experience is consistent with conditions being reported by other major Canadian retail landlords, where occupancy remains in the high-90% range and rents continue to rise on renewals.
RioCan reported retail committed occupancy of 98.8% in the second quarter, while other major Canadian retail landlords have similarly reported occupancy in the high-90% range. Several of the country’s largest retail property owners are also recording double-digit increases on lease renewals, reflecting continued demand for well-located retail space.
CT REIT’s 99.5% occupancy places its portfolio at the upper end of an already tight market. The REIT completed nine Canadian Tire store renewals during the quarter and has addressed upcoming Canadian Tire lease expirations through the first half of 2027.
The renewal process typically begins about 18 months before lease expiry, giving CT REIT visibility into upcoming leasing activity. Canadian Tire leases had a weighted average remaining term of 7.1 years at quarter-end.
Strong operating fundamentals are also making quality retail properties attractive to investors at a time when relatively few suitable assets are reaching the market. Salsberg said broader real estate transactions and merger-and-acquisition activity could create acquisition opportunities for CT REIT, although management did not identify any specific deals.
Canadian Tire Holds 10 to 15 Potential REIT Properties
Canadian Tire Corporation remains CT REIT’s dominant tenant and provides another potential source of acquisitions through properties that can be sold to the REIT in transactions known as vend-ins.
Salsberg estimates Canadian Tire currently has approximately 10 to 15 properties on its balance sheet that meet CT REIT’s investment criteria. Management is discussing some of those assets with Canadian Tire, providing a potential acquisition pipeline outside the increasingly competitive market for third-party properties.
One such transaction was completed during the second quarter in St. Catharines, Ontario, where CT REIT acquired a Canadian Tire store and Canadian Tire Gas+ property for approximately $13 million. The property added about 52,400 square feet of gross leasable area and is expected to generate a going-in yield of 6.9%.
Salsberg said CT REIT had been discussing the St. Catharines property with Canadian Tire for some time and had effectively established the pricing earlier. The property is located near Pen Centre in what management described as a strong market for Canadian Tire.
CT REIT also closed approximately $76 million of previously announced investments during the quarter, adding more than 232,000 square feet. They included Centre 50, a Canadian Tire-anchored multi-tenant property in Edmonton, and Marché Rosemère, a retail property adjacent to an existing Canadian Tire store in Rosemère, Quebec.
The REIT also acquired land adjacent to an existing property in Oliver, British Columbia, and completed intensification projects at Canadian Tire stores in Penticton, B.C., Burlington, Ontario, and Valleyfield, Quebec.
Canadian Tire Development Cycle Shifts
Canadian Tire remains central to CT REIT’s business, but management expects fewer Canadian Tire-related development projects to enter the pipeline than during the previous several years.
Salsberg said the pace of new projects has slowed, largely because fewer Canadian Tire-related developments are being added. He linked the change to Canadian Tire’s move from its previous Better Connected strategy to its current True North strategy.
Better Connected generated an active period of investment in Canadian Tire’s physical network and development activity at properties owned by CT REIT. Canadian Tire continues to invest in store improvements under True North, but Salsberg expects Canadian Tire-related retail development flowing through CT REIT to be lower over the next few years than during the previous strategy cycle.
CT REIT is also pursuing retail development opportunities independently of Canadian Tire. Management pointed to land acquired in British Columbia’s Okanagan Valley as a future retail project unrelated to Canadian Tire and said a couple of similar opportunities are in the works.
Those projects add another potential source of growth alongside Canadian Tire vend-ins, third-party acquisitions and intensification of properties already in the portfolio.
Development Pipeline Totals $354 Million
Despite fewer projects entering the pipeline, CT REIT has substantial development activity underway. At the end of the second quarter, nine projects represented approximately $354 million in total development costs. About $191 million had been spent, with another $66 million expected to be invested over the following 12 months.
Approximately 488,000 square feet of space under development was subject to committed leases, equal to 94.2% of total gross leasable area under development. Canadian Tire accounted for 91.6% of that leased space.
Salsberg noted that while the number of projects has declined over the past year, the dollar value of the pipeline remains substantial, in part because of the scale of the Canada Square project in Toronto.
Canada Square Retrofit Advances
CT REIT continues to advance the modernization of two existing office buildings at Canada Square at Yonge Street and Eglinton Avenue in Toronto. The current project involves approximately 680,000 square feet at 2180 and 2200 Yonge Street, more than 90% of which has been leased. Upgrades to the curtain wall systems are underway, interior improvements at 2180 Yonge are nearing completion and work on new elevator systems has begun.
Approximately 17% of the project budget had been spent by the end of the second quarter. Management said the retrofit is expected to continue through the end of 2028 and indicated that the project will cost a little more than $200 million at completion.
Management also provided further clarity on the longer-term redevelopment of Canada Square. The current office retrofit represents Phase I, while a future Phase II would involve residential development on the remaining Canada Square lands.
Phase II would involve ground-up construction rather than another retrofit and would have its own scope, budget and development timeline. No timetable for proceeding with that phase was announced.
CT REIT Reports Higher NOI and AFFO
CT REIT’s same-property net operating income, including the impact of property intensifications, increased 2.5% from the second quarter of 2025. Overall NOI increased 4.8%, reflecting contractual rental increases and contributions from properties acquired and developed over the past two years.
Adjusted funds from operations per diluted unit increased 2.5% year-over-year to $0.326, while the AFFO payout ratio was 72.7%, compared with 72.6% a year earlier. CT REIT also implemented a previously announced 3.5% increase in its monthly distribution during the quarter.
The REIT ended June with approximately $312 million of liquidity, including cash and an undrawn $300-million committed bank credit facility. A separate $300-million uncommitted facility with Canadian Tire had approximately $187 million available at quarter-end.
