Canada's retail sector has not had an easy go in 2025 – but a trade war and the closure of Hudson's Bay haven't yet spelled doom for the industry.
According to a new report from commercial real estate investment firm CBRE (Coldwell Banker Richard Ellis), retail fundamentals nationwide are continuing to hold up. In Victoria, the success of suburban retail leasing and restaurant and grocery markets are highlights in the local industry.
“Deals, while taking longer to close, are still getting done, albeit with greater levels of scrutiny. Tenant demand remains at a very healthy level with activity coming through almost all sectors, although most particularly from health and wellness, fitness, grocery and restaurants,” reads the report.
The report breaks down the retail rental market through the first half of 2025 to examine retail trends among Canadian cities.
Victoria's Fort Street saw an increase in asking rents, while for the second straight report, Government Street rents continued to decline.
CBRE’s report for the second half of 2024 showed asking rents on the historic street between $50 and $80 per square foot. The 2025 report shows they now range from $50 to $65.
There are positives, however, as turnkey restaurant spaces are routinely filled in Victoria, the report states.
“Faced with eroding margins and profitability, restaurant operators are increasingly favouring second-generation space to save on high construction and fit-out costs,” writes John Moss, CBRE senior vice-president, in the report.
“New grocery tenants are also entering the downtown core, aiming to capitalize on anticipated residential growth,” the report adds. Grocery stores have been making headlines throughout Victoria with the opening of H-Mart, and the announcement that the Victoria Public Market would be redeveloped into a grocery store.
The closure of Hudson's Bay locations at Mayfair Mall and the Bay Centre was highlighted as an opportunity for a “new anchor tenant to secure over 375,000 square feet of combined prime retail space.”
Suburban retail was one of the few formats to see a notable improvement – mixed-use suburban retail spaces were the only format to see an increase in net asking rental rates, according to the report.
“Suburban retail leasing kicked off the year with strong momentum,” the report states. “Fuelled by a competitive pre-leasing market among new market entrants and expanding tenants.”
These spaces had an asking rent of $35 to $60 per square foot, an increase from the second half of 2024, when the range was $35 to $50.
Other development classifications remained mostly stagnant, with little to no change compared with the second half of last year. The retail format that did see a drop in its asking rent range was the regional mall, which topped out at $50 per square foot compared with $60 at the end of last year.
Overall, across Canada there is a continuing slowing of rental appreciation. Rent growth was recorded in just 16 of the 120 format types tracked by CBRE. Four of the 11 markets examined by CBRE reported no change in rents over the last six months.
