Canada retail market dynamics

Supply scarcity continues to underpin the Canadian retail real estate market. Construction starts dropped by 40+ percent this year to a decade low, leaving an already thin pipeline at approximately 5 million s.f. (near decade low). Leasing is down approximately 11 percent, signalling the growing difficulty that tenants face in finding the right space.

High-growth suburban is fuelling construction of daily-needs centres. Calgary, Toronto, and Edmonton are Canada’s most active daily-needs development markets, representing almost half of all daily-needs centres built over the past decade.

The barbell effect is in full swing. Mid-range grocery anchors have collapsed from 45 percent to 30 percent of new development over the past decade, and are projected to reach 15 percent by 2033. The opening of Oakridge Park, meanwhile, has pushed luxury to 43 percent of Canadian new fashion openings this year and surprisingly placed Vancouver ahead of New York City in luxury openings.

Food services are growing faster than other major retail categories at 5.6 percent this year, benefitting from strong tourism activity. Core essential goods (ex gasoline) follow at approximately 4.7 percent, with core discretionary goods (ex autos) trailing at around 2.2 percent. Food services and core essential goods are gaining momentum, while core discretionary is slowing. Dining represents the largest share of new store openings, at one-third of all announcements.