Buy yourself a pair of new sunglasses and hold on tight, because the Canadian retail landscape promises to be bright and active in 2024.
Retail activity remained positive in the final two quarters of 2023, according to CBRE’s new H2 2023 Retail Rent Survey. Best-in-class locations continued to lease quickly, driving rents up in many areas and setting the tone for the year to come.
Expect to see established brands grow through consolidation and acquisition, while smaller retailers innovate to capture consumer dollars and expand despite the economic headwinds.
Here are the trends and opportunities that will shape Canadian retail in 2024.
More retail market metric adjustments were recorded in the second half of 2023 than in any previous Retail Rent Survey, as demand for prime retail real estate outpaced scarce supply.
CBRE noted 38 increases and eight reductions on benchmark rent prices, with Calgary, Vancouver and Winnipeg reporting the greatest number of rental rate increases, up in five or more retail formats or key urban areas across each city.
Expect further rental appreciation in 2024 as vacancy remains limited in the most popular retail formats and high construction costs stifle possible relief from new development.
Urban Areas in Balance
Key urban areas have faced headwinds, with nearly as many rental rate increases as decreases in the second half of 2023. In fact, urban streetfront retail was the only category recording declines in H2, in Kitchener-Waterloo, Toronto, Ottawa and Montreal.
Urban areas in major markets should bounce back in 2024 as foot traffic recovers from the challenges of the past few years.
Eight of the 11 Canadian markets tracked in the survey saw rental rate increases in the convenience and strip centre category, the most of any retail format. Demand for open-air shopping centres should remain strong in 2024, especially grocery- or food-anchored, as consumers favour nearby destinations for their daily needs.
Photo credit: The Well Toronto
Mixed-Use Adds Value
Mixed-use developments continue to gain traction, with rental rate increases in this segment in five of 11 markets measured. Notably, Toronto’s The Well opened last fall to much fanfare, while Winnipeg welcomed the delivery of Polaris Place. Another year of strong performances is forecast for mixed-use retail.
Haute Couture Flourishes
The luxury sector continued to thrive in the second half of 2023 as new brands entered Canada, often with several locations. Driven by confidence in the Canadian market and increasing rates of international tourism and foreign investment, prestigious luxury apparel brands such as Kith and LOEWE committed to their first Canadian stores in 2023.
The grocery sector saw continued growth in the second half of 2023, both from traditional large format box stores and smaller independent grocers. Demand for specialized grocery increased as consumers sought ethnic food and health food stores.
Fast food retailers also had a strong second half of 2023, as national chains, small groups and independent restaurants opened across Canada. Freestanding pads with drive-thrus are in particularly high demand as quick-service restaurant providers were amongst the most active users, especially in Victoria, Ottawa and Kitchener-Waterloo.
We’ll keep track of the dynamic Canadian retail market throughout the year and keep you up to date in future Advantage Insights stories.
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