CBRE Survey: Canadian Retail Markets to Persevere in 2025 Despite Immigration Curbs, U.S. Tariffs and Lack of Development

Canadian retail performed well in 2024, with robust demand for space and rental appreciation, and CBRE anticipates the trend to continue this year. But challenges loom.

Retail in Canada performed very well in 2024, with demand for space robust across almost all markets and sectors. Amid a limited development pipeline, retail vacancy rates declined to historical lows last year and many markets saw rental appreciation, according to CBRE’s H2 2024 Retail Rent Survey, a snapshot of retail trends and rents for 11 Canadian markets.

CBRE anticipates these trends will continue in the first part of 2025. Retail sentiment is positive, the market remains supply-constrained, and there is tenant demand in almost all sectors, particularly in grocery, restaurants, QSRs and those associated with general service-based uses, health and wellness, and fitness.

“But the long-term trajectory is more difficult to project,” says CBRE Senior Vice President Alex Edmison, who heads the National Retail Group. “One of the largest drivers of retail growth has been immigration, which will moderate this year. The threat of tariffs and their potential to throttle the economy could have a material impact at a time when consumers were already feeling pressure. But overall we think that Canadian retail is in good shape heading into 2025.”

CBRE’s Retail Rent Survey notes that interest rates will be something to watch in 2025; their downward trajectory helped support consumer confidence through 2024. But rising bond yields could limit future improvements on this front. The retail market will likely remain supply constrained into the foreseeable future, and there will be very little retail development. Even if the economy softens, retail availability will likely remain low.

Here some other key takeaways from the Retail Rent Survey:

• Rent growth was noted in 24 of the total 120 areas included in the survey. This is a marked slowing in the pace of rent appreciation cross-country and follows 40 increases noted at mid-year.
• Four of 11 markets reported no change in rents over the last six months. This ties the H1 2023 edition of the Retail Rent Survey for the greatest number of markets with no noted movement in rents.
• Mixed-use urban and unenclosed community centres experienced escalating rents in four markets each, the most of any retail formats.
• Six key urban retail nodes across four markets noted increased rental rates. Select cities meanwhile continue to face challenges from decreased daytime foot traffic, with focus remaining on suburban sites

Here are the most active retailers and growing segments for 2025:

• Grocery: The grocery segment is competitive across most markets with an emphasis on discount banner expansion in underserved areas. Low vacancy and a lack of development has created a very dynamic environment for expansion, however. In a race for space, second generation space and off-market deals are common. Brands like Loblaws are actively looking to grow their No Frills and Maxi formats and are targeting smaller size stores between 10-20,000 sq. ft., as well as T&T.
• Fitness: From discount to premier, there is a wide variety of offerings and activities available on any budget. Pilates and yoga studios, and other club/gym formats like Equinox and Fit4Less are all currently in expansion mode. Innovative community-based offerings are also picking up steam like Fairgrounds, which is taking space in transitional assets, and Othership, which is gaining appeal in the U.S.
• Service/Medical: Momentum continues to build in the medical space, with consolidation as well as growth from start-ups. Innovation is being seen in the vet space in tandem with consolidation countrywide, along with growth in urgent care business and activity in the cardiovascular space.
• Luxury & Apparel: The athletic and athleisure apparel sector is experiencing healthy growth and has been active across high street and enclosed malls. First-to-market brands such as Nike, ON, Alo Yoga and Vuori are taking space in the most in-demand areas. And luxury houses such as LVMH are expanding in Toronto’s Bloor Yorkville area.

Some of the notable retail trends to watch for in markets across Canada:

• In Calgary, there has been tremendous demand from daycares securing space, but the market is now beginning to run short on options. QSR food opportunities meanwhile continue to be in strong demand. Edmonton's QSR food scene has also experienced a surge in traffic as American franchises like Chick-fil-A, Krispy Kreme, Chipotle, and Firehouse Subs opened their first locations.
• True North Real Estate Development finalized their acquisition of Portage Place Mall in Winnipeg. Adding residential, medical, office and new retail components, this massive redevelopment will impact downtown Winnipeg as a whole. Hopewell has begun development on the retail portion of their Refinery District project, which will bring 7,000 sq. ft. of retail space to market in Q2 2025.
• Toronto’s restaurant scene remains active in the Financial Core with recent openings from JOEY Restaurants and Estiatorio Milos. QSR is also making moves, with Shake Shack opening new locations at Yorkdale Shopping Centre and Union Station. New boutiques in Yorkdale’s renovated luxury wing include Versace, Loewe, Jimmy Choo, and Brunello Cucinelli.
• In Montreal, the overhaul of Sainte-Catherine Street West is now 50% complete. For the first time in years, there is no construction, and the street is fully accessible. Alo, Sephora, and New Balance have all secured new deals on Sainte-Catherine Street West, with more activity expected in 2025.