GTA Retail Investment Falls 30% as Scarcity Supports Prime Assets

GTA retail investment volume fell 30% year over year to just over $925 million in the first half of 2026. Tight vacancy in grocery anchored centres contrasts with underperforming regional malls, creating a sharply bifurcated market.

GTA retail investment volume declined 30% year over year to just over $925 million in the first half of 2026, despite total commercial real estate investment rising nearly 35% to $10.2 billion. The decline reflects limited availability of stabilized retail assets and elevated financing costs rather than a broad withdrawal from the sector. Current indicative cap rates range from 4.75% to 5.75% for strip retail, 5.5% to 6.5% for neighbourhood centres, and 5.25% to 7% for regional malls. Recent offerings illustrate the spread in pricing, including a fully leased Avenue Road property marketed at a 2.53% cap rate and a Dundas Street asset offered at a 6.40% cap rate.

Grocery anchored and essential service centres remain the strongest leasing segment, with CBRE reporting tight vacancy across key formats and sustained tenant demand. The market is supported by population growth, limited new construction, and demand from grocery, pharmacy, fitness, food, and service tenants. Toronto’s downtown retail has also benefited from improving office attendance, which is supporting weekday traffic and demand for food and beverage operators. Retail construction is constrained, with approximately five million square feet under construction nationally in the second quarter of 2026, the lowest level since the pandemic, limiting near term replacement supply.

Large format and regional mall performance remains more uneven. Primaris agreed to acquire Upper Canada Mall for $411 million, but the 990,000 square foot property was reported at only 70% occupied and approximately 80% committed, with substantial vacancy linked to former anchor stores. The centre has identified 263,000 square feet of former anchor and large format space for redevelopment and leasing, while smaller format retailers generate $271 million in annual sales, or $888 per square foot. Recent leasing activity shows active backfill demand, including T&T Supermarket taking roughly half of the former Hudson’s Bay box at CF Markville and Jumbo leasing a 47,000 square foot former Toys “R” Us unit at Vaughan Mills.