Retailers in major Canadian markets are facing a challenging search for space due to a significant decline in retail construction.
What happened
According to commercial real estate firm JLL, retail construction starts have dropped to their lowest level in a decade, with only 1.5 million square feet of retail space under construction in the first half of this year. This represents a substantial decrease from 2.7 million square feet in the same period last year and 5.3 million square feet in the first half of 2016.
The decline in construction starts is attributed to rising building costs, the increasing redevelopment of existing retail space, and the cancellation of residential projects that would have included retail space on the ground floor. As a result, retailers are finding it more difficult to secure rental properties, with low vacancy rates and declining leasing activity across most categories of retail space.
Landlords are being more selective in their leasing decisions, prioritizing stable tenants such as supermarkets, which are seen as more resilient in the face of economic uncertainty. In fact, JLL's research found that 96 percent of new properties built since 2022 in the
