Canada’s retail real estate sector has entered a new phase of the cycle. Leasing activity remains strong, vacancy levels are tight in many markets, and rent spreads have widened across the country. At the same time, retailers and landlords alike are navigating rising costs, demographic shifts, and evolving consumer expectations.
Those themes were explored in depth during an online panel discussion hosted by Retail Insider Publisher Craig Patterson for an ICSC webinar on February 27, 2026. The conversation brought together leaders across the retail ecosystem, including Sophie Marai, Vice President of Client Strategy at Environics Analytics; Kate Camenzuli, Vice President of Retail at CBRE Toronto; Ali Baker, Principal and Vice President of the Retail Services Group at Avison Young; Pria Rajput, Founder of Black Label Designs; and Petr Kafka, Principal at Salthill Capital.
The panel examined the evolving Canadian retail leasing market from multiple perspectives, including consumer data, tenant representation, landlord strategy, design trends, and capital markets.
Throughout the discussion, a recurring question emerged: has retail already recovered, and if so, what comes next?
Retail Has Stabilized, But It Has Also Changed
Retail recovery has been widely discussed since the pandemic years, yet panelists suggested the narrative may now need updating.
Kate Camenzuli said the concept of recovery may no longer fully describe the current landscape.
“We’ve been talking about retail recovery for years. The reality is that retail has changed, and that change is showing up in where traffic and growth are happening,” she said.
Population movement has played a major role in reshaping retail demand across Canada. Interprovincial migration and housing affordability pressures have driven consumers out of traditional urban cores and into secondary markets.
According to Camenzuli, cities such as Oshawa, Hamilton, Barrie, and Kitchener-Waterloo are benefiting from these shifts as families seek larger homes and more affordable living.
“Traffic isn’t just about downtown anymore. It’s about where people live, where they move, and how those demographic shifts reshape demand,” she said.
Sophie Marai reinforced that demographic dynamics are increasingly shaping retail performance.
“We’re seeing traffic stabilize overall, but the pattern is highly dependent on demographics and location,” she said.
She noted that population growth and travel activity have helped support retail activity in major urban centres, while regional population shifts have strengthened retail demand in secondary markets.
A Landlord’s Market Emerges
Despite macroeconomic concerns, the supply-demand balance currently favors landlords.
Petr Kafka explained that limited development over the past two decades has created a structural shortage of retail space in many Canadian markets.
“For the first time in my career, this feels like a true landlord’s market,” he said.
Several factors contribute to this dynamic. Canada has experienced substantial population growth while very little new retail space has been constructed. At the same time, many weaker tenants exited the market during the pandemic, leaving behind more resilient operators.
Those surviving retailers have also become more digitally sophisticated, improving their ability to connect with customers and drive sales.
“Retailers came out of the pandemic more resilient, more efficient, and more connected to their customers,” Kafka said.
The result has been significant rent growth in many markets, particularly for high-quality locations and grocery-anchored shopping centres.
“In some cases, landlords are running RFPs for a very limited number of vacancies. That tells you how tight supply has become,” he said.
Rising Rents Create New Tensions
While demand remains strong, rising rents are beginning to test tenant economics.
Camenzuli said many retailers are increasingly concerned about the sustainability of escalating lease costs.
“We’re less worried about weak demand than we are about continued rent escalation. At some point, the market reaches its ceiling,” she said.
As rents increase, some traditional tenant categories are being priced out of certain locations.
“We’re starting to see some food users replaced by other types of tenants,” she said.
Ali Baker said her team continues to see strong demand from retailers looking to expand. However, the shortage of available space has forced brokers to become more creative in securing deals.
“Our biggest challenge is supply. Retailers still want to grow, but there just isn’t much space to choose from,” she said.
Many transactions now involve repositioning existing spaces rather than leasing newly developed ones.
“We’re finding opportunities where landlords want to upgrade a category or replace an underperforming tenant with a stronger concept,” Baker said.
In urban markets, some deals are also occurring off-market through unsolicited proposals or creative leasing strategies.
Retail Categories Continue to Evolve
Another key theme discussed during the panel was the changing mix of retail tenants.
Traditional retail categories remain important, but new types of tenants are increasingly shaping shopping centres.
Experiential uses such as entertainment venues, wellness clinics, and fitness concepts are expanding in both urban and suburban markets.
Pria Rajput said this shift reflects changing consumer priorities.
“Consumers are more selective now, and spending on experiences has been growing faster than spending on goods,” she said.
Retail environments must now communicate value immediately and align with evolving lifestyles.
“The real question is whether a brand is convenience-driven, lifestyle-led, or wellness-focused,” Rajput said.
Wellness-related businesses in particular are generating consistent foot traffic because they encourage repeat visits.
“A fitness operator can drive multiple visits a week, while a longevity clinic brings in scheduled appointments. That creates predictable traffic,” she said.
When combined with complementary food and beverage uses, those businesses can increase dwell time and stabilize shopping centre ecosystems.
Consumer Spending Patterns Are Shifting
Panelists also discussed how evolving consumer behaviour is influencing retail performance.
Marai noted that consumer spending patterns increasingly reflect behavioural and demographic factors.
“Gen X households are driving a lot of spending because they have families and broader household needs,” she said.
At the same time, spending in certain categories has softened. Restaurant spending, for example, has declined in some markets as consumers look for ways to control costs.
Discount retail has been one of the biggest beneficiaries of this shift.
“We’re seeing strong growth in discount categories,” Marai said.
She described a phenomenon sometimes referred to as the “Range Rover in the no-frills parking lot,” where higher-income consumers are increasingly comfortable shopping at discount retailers.
Consumers are also adjusting spending to align with values such as buying Canadian products, which has influenced retail traffic patterns.
Design and Experience Play a Larger Role
As rents rise and competition intensifies, the physical retail environment has become more important than ever.
Rajput explained that design strategies are evolving to support brand identity and consumer engagement.
“Luxury today is less about materials and more about experience,” she said.
Retail environments are increasingly designed to create emotional connections and encourage social sharing online.
Hybrid retail formats are also gaining traction. These combine multiple uses such as retail, hospitality, and services within a single space.
“The goal is to create spaces where people want to spend time,” Rajput said.
Retailers are investing more heavily in store design because the space itself can serve as a marketing tool.
When visually distinctive environments are shared on social media, they can generate organic promotion and drive additional traffic.
Limited New Development Ahead
Looking ahead, panelists expect the Canadian retail leasing market to remain supply-constrained.
Kafka noted that construction costs and development levies have made new retail development financially challenging.
“Without policy changes around development costs and taxation, it’s hard to see a wave of new retail construction,” he said.
Instead, much of the industry’s focus will likely shift toward repositioning existing assets.
Vacancies created by large retailer closures may also present opportunities for redevelopment.
Camenzuli suggested that Canada may be entering a transitional moment in retail real estate.
“We’re likely to see more recycling of space and more focus on finding the highest and best use for existing assets,” she said.
At the same time, new retail concepts and emerging brands could reshape the industry in ways that are not yet fully visible.
“We may not yet know what the next generation of retail businesses will look like, but that innovation is coming,” she said.
Finally, the panel addressed the relationship between physical retail and e-commerce.
While online shopping remains important, brick-and-mortar stores continue to play a critical role in the customer journey.
Marai explained that consumers increasingly conduct research online before visiting physical stores.
“We’re seeing more purposeful shopping. Consumers often research online first, then come into store ready to buy,” she said.
This dynamic means foot traffic may not always appear as high as in previous years, but conversion rates can be stronger.
Retailers that effectively integrate digital and physical channels are best positioned to succeed in this environment.
A Complex but Resilient Market
Overall, panelists agreed that the Canadian retail leasing market remains strong, though increasingly complex.
Tight supply, population shifts, changing consumer behaviour, and evolving tenant mixes are all reshaping the industry.
Despite rising rents and economic uncertainty, demand for well-located retail space remains robust.
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