Retail

Trends to Watch

• Retail will be steady, but success will vary across segments and geographies

  Retail sales growth is projected to remain steady but slow as cautious households reign in their budgets, with performance appearing highly localized rather than uniform across the country. Growth is trending most positively in secondary and tertiary cities, which currently offer the greatest runway for brands expanding into previously untapped markets.

• Technology to provide data-driven power

  The rise of AI is transforming the marketplace by arming both consumers and retailers with data-driven insights for product research, recommendations, and shopping habit analysis. The most successful will be those who leverage these digital tools while maintaining the human interaction still preferred in the physical store environment.

• Exit of HBC has unlocked a unique opportunity in a tight market

  The departure of HBC has allowed landlords to reimagine large footprints, attracting strong interest from entertainment uses and large-format retailers. Remaining locations will be strategically evaluated with the core outcome of making the centres more productive, whether demising or strategically demolishing spaces.

Steady growth and progress to define the retail market

The Canadian retail landscape weathered a series of headwinds in 2025 including a weaker economy, tariff pressures and the closure of one of the oldest Canadian retailers. While many of these factors are still unfolding, the severity of their initial impact has lessened, helping put the sector on more stable footing in the year ahead.

Economic uncertainty and a weaker jobs outlook have weighed on consumer confidence, creating a much more cautious consumer base. Heading into 2026, more than half of shoppers are expecting their personal finances to worsen in the coming months. In light of this, households, including higher income shoppers, will be increasingly selective and looking to reign in their budgets, resulting in steady but slower retail sales growth over 2026. This backdrop is expected to further propel the rise of value-based retailers and see more consumers adopt buy now-pay later models.

Overall, performance will be highly localized and vary geographically in 2026. In particular, secondary or tertiary cities are trending positively and seeing the greatest runway for growth. Many major brands are following demographic shifts and infrastructure investments, expanding into new or previously untapped markets across the country.

The role of technology will play a big role in revolutionizing the retail marketplace. Previously technology was leveraged to create a seamless omnichannel experience or provide unique in-store experiences. Today, the rise of AI is arming shoppers and retailers alike with more power in the form of data.

Discerning consumers are using AI-driven shopping assistants to help with product research. These tools are being used to not only compare prices and gather product reviews in real-time, but for product recommendation as well. While the adoption of AI is rising it is not widespread as of yet. According to Deloitte, younger generations have embraced AI for product discovery and research while older generations remain wary, citing data privacy concerns.

For retailers and landlords, leveraging AI for data-driven insights on consumers and their shopping habits will separate market leaders. It is important to remember amidst all this advancement however that the physical store remains vital. According to PwC, consumers still express a strong preference for human interaction over automated assistants during the checkout and service process.

Healthy demand and a lack of supply has aided in keeping the retail sector stable, but tight in recent years. These strong fundamentals are starting to unlock new construction in selective markets, however, the departure of HBC is presenting the market with a unique opportunity as well.

While initially placing question marks around the future of the mall, interest in these spaces has been strong with many prime locations leased by other large format retailers or entertainment uses, filling the space with uses that drive consistent foot traffic.

Landlords of remaining locations are strategically evaluating the asset with respect to tenant mix and how it fits within their portfolio with the aim of making their centres more productive. In some cases, this could see some former anchor spaces demised, extending the mall corridor, or in some cases completely demolished. While it will take time to fully realize these visions, the capital focus on reimagining these large footprints suggests a significant upside for the Canadian real estate landscape.