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October 18, 2021 - Blog Article
3 Reasons Why Toronto’s Retail Is Expected to Remain Hot

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The pandemic brought nearly every industry to its knees, but it wasn’t strong enough to beat Canadian CRE (Commercial Real Estate). It has proved resilient time and time again, with some CRE submarkets seeing better numbers than ever before.

The growing momentum for Toronto’s streetfront retail is the latest proof that the market is getting back on track. Here are three reasons why the momentum is growing for Toronto’s retail properties.

 

Reason #1: Larger Retailers Are Leasing More Space

U.S. news have been filled with headlines about larger retailers closing their stores; however, in Canada the opposite is happening. There is pent-up demand amongst retailers. More and more are beginning to enter the market and they are leasing up more space. 

Canadian CRE retail owners are taking advantage of the demand. They have been enticing large retailers to take on big box spaces by lowering the rents. For retailers, in an effort to increase their profitability, they are seizing the opportunity and signing deals on new space.  

The lower rents are only being offered to larger retailers. Those with less than 2,000 ft2 of space have not seen significant changes in rent prices. The demand keeps growing and leading to more retail leases and property transactions this is why the momentum seems to be growing.

 

Reason #2: Retail Leasing Demand Shows No Signs of Slowing Down

Retail leasing in Toronto saw a 60% increase from Q1 to Q2 2021, and it has not stopped growing since.

To quote Arlin Markowitz, the Executive Vice President at CBRE and founder of the Urban Retail Team: “There’s been more leasing in the past 60 days than probably in the past year and a half”.

Vaccinations played a part in the retail leasing growth, aside from lower retail rents. Ever since Canada relaxed travel restrictions for fully vaccinated Americans on August 9, they have entered the country without quarantining.

Some of the most notable recent retail leasing deals include Nike, Apple, and LCBO. Nike leased a 25,000 ft2 store at Yorkdale Shopping Centre. Apple leased nearly 20,000 ft2 of space at The One, while LCBO leased 12,000 ft2 for its new store in the Manulife Centre.

Retail leasing at The Well is picking up as well. The mixed-use building at the heart of Toronto’s west end will offer 420,000 ft2 of retail and foodservice space.

Some of the recent tenants who leased space at The Well include the Sweat and Tonic fitness club, the Shoppers Drug Mart pharmacy chain, a major restaurant group, various coffee shops, and banks. According to Markowitz, many other retail tenants are about to sign new leases as well.

 

Reason #3: Retail Investment Activity Is Heating Up

Streetfront retail investment activity in Toronto hit a new record in Q1 2021, reaching a whopping $181 million in traded properties. That’s a huge improvement from Q2 2020, when it hit rock bottom, seeing a 35% decrease from 2019.

With many street-front retailers selling their properties due to vacancies, investors are seizing more development opportunities for mixed-use properties. Since the multifamily market is booming once again, we expect to see more retail real estate projects mixed with multifamily.

 

Summary

Momentum is growing for Toronto’s streetfront retail sector and it has not shown any signs of slowing down. Thanks to higher demand from larger retailers, lower rents for larger spaces, and overall stronger leasing and investment activity, Canadian Retail CRE is expected to continue to thrive through the end of the year.