Toronto Retail Investment Forecast

Demand-side challenges to prolong upward vacancy pressures. Last year, mounting economic headwinds from trade tensions and the closure of Hudson’s Bay stores led to negative net absorption in Toronto, pushing the vacancy rate to its highest level since 2017. Retailers grew increasingly apprehensive about expansion, delaying rollouts and lease renewals amid uncertain demand and tighter margin pressures. Looking ahead, persistent trade uncertainties and subdued population growth will cloud the near-term outlook. Toronto has long been a top destination for new immigrants, and restricting population inflows could further temper growth in retail sales amid sluggish foot traffic expansion. Additionally, ongoing weakness in the condominium market may continue to erode household net worth and prolong muted consumer confidence, posing some downside risks to spending. As a result, space demand is expected to remain soft in the short term. On the supply side, completions are projected to pull back significantly in 2026 as developers have become cautious as cost pressures mount. This limited pipeline should help cap any large increases in vacancy and support broader market stability.