Canada retail market dynamics

The barbell retail model ─ where value and premium segments thrive while the middle hollows out ─ is becoming a permanent organizing principle of Canadian retail. Value-driven consumer spending patterns, retailer investment in discount formats, and diverging real estate fundamentals all reinforce this bifurcation. As such, stakeholders that position at one end of the barbell are poised to benefit most.

Capital flows toward the barbell endpoints. Major retailers are committing billions of dollars to value positioning while premium brands expand aggressively into dual-node strategies combining High Street and top-tier mall locations. Dollar-store openings more than doubled in 2025.

Real estate fundamentals reflect the growing divide. The Hudson’s Bay closures that drove 2025 absorption into negative territory exemplify the hollowing of middle-market physical retail. Mall vacancy rates surged to 7.5 percent in 2025 while neighbourhood and strip centre vacancy rates remain slightly under 2.0 percent. The development pipeline favours convenience retail and premium/luxury mixed-use developments.

Spending polarization shows stronger signs in e-commerce and tourism. High earners’ spending patterns remain mostly unchanged, while low- and mid-earners – particularly younger generations – trade down or significantly cut back. E-commerce is seeing double-digit growth in value and premium segments, and overall travel spending is surging despite younger cohorts scaling back.