Toronto’s retail real estate market is undergoing a fundamental shift as restaurants and food service concepts now dominate leasing activity, while a severe supply shortage has compressed availability to levels unseen in decades.
JLL’s Fall 2025 Canada Retail Market Dynamics report released last week documents dining, entertainment, and fitness and wellness services comprising more than 50% of new store announcements in the first half of 2025, with dining alone representing over 40% of retail expansion nationally—a concentration that signals a permanent reordering of urban retail priorities.
Graham Smith, Executive Vice President of Retail at JLL, told 6ixRetail the shift reflects fundamental changes in consumer spending patterns. Food and beverage now accounts for 55% of every transaction his team completes, with no signs of deceleration despite broader economic uncertainty.
“We like to use this term now called foodertainment. The golf simulators of the world that also include food and beverage, the dart concepts that also include food and beverage, SPIN ping pong with food and beverage,” Smith said.
Smith identified three distinct pricing tiers within full-service restaurants operating successfully in Toronto’s Financial District—from approachable concepts like The Keg and Chop Steakhouse to established destinations like Harbour Sixty, and newer upscale entrants like Jacobs and Black and Blue targeting different demographics and occasion-driven spending.
The concentration of restaurant deals coincides with the most severe supply shortage in recent memory. Toronto posted net absorption of 323,000 square feet in the first half of 2025—only one-third of the volume recorded in the same period last year—while available space dropped 40 basis points to 1.6%, matching record lows last seen during the pandemic recovery.
Scarborough recorded the sharpest reduction in available space. Leasing activity across the city totaled approximately 1.4 million square feet during the period, falling below historical averages as retailers require significantly longer timelines to secure quality locations. Asking rents continue rising but at a moderated pace relative to historical growth rates.
Smith, whose 15-year career tracking urban retail markets spans multiple economic cycles, characterized current market tightness as unprecedented in his professional experience.
“Ossington is the tightest urban retail market in all of downtown Toronto,” Smith said. “Bloor Street went from north of 40% availability in 2020 now down to effectively almost 10%.”
The Bloor Street compression alone represents a 75% reduction in available inventory over five years. What inventory does exist often presents significant challenges—multi-level configurations or unique architectural elements that require substantial tenant investment, further constraining options for retailers seeking turnkey spaces with immediate occupancy potential.
Smith noted most urban landlords lack sufficient portfolio concentration to implement strategic tenant mix curation—a capability that remains limited to Hallmark’s Ossington holdings, Lifetime’s Liberty Village portfolio, and institutional owners including Oxford Properties and Brookfield in the Financial Core.
New supply continues declining precipitously. Canada recorded approximately 1.5 million square feet of retail completions in the first half of 2025, down 37% from the comparable 2024 period. Construction starts fell 26% year-over-year and sit 42% below long-term historical averages, suggesting the supply shortage will persist well into 2026.
Two large mixed-use developments in West Toronto represent the most significant near-term supply additions. Dupont & Dufferin and Bloor & Dufferin will deliver 300,000 square feet and 75,000 square feet of retail space respectively, though both remain under construction with completion dates extending into late 2025 and 2026.
Downtown fundamentals continue strengthening despite broader economic headwinds. Office attendance has climbed to peak levels of 88% on Wednesdays, while tourism visitation and spending remain consistent with 2024 levels. The combination supports sustained retail leasing velocity in the core, with landlords maintaining pricing discipline despite the challenging macroeconomic backdrop.
Recent openings underscore the breadth of downtown activity. Shake Shack opened at Yonge and Eglinton on October 3rd as part of its Toronto expansion along major urban corridors. Whole Foods Market is scheduled to open at the base of the King Toronto condominium development. In Bloor-Yorkville, Italian luxury brand Luca Faloni is opening its first Canadian store, while fine-food grocer Stock T.C. is backfilling the former Pusateri’s location.
Smith’s team brokered the Stock T.C. transaction, which he characterized as maintaining the premium grocery positioning the Bloor-Yorkville trade area has historically supported while adapting to evolving consumer preferences.
Mall activity mirrors broader market dynamics. Dining and apparel & accessories lead category performance, with Uniqlo and % Arabica both announcing Greater Toronto Area expansion plans. Simons completed major format openings at Yorkdale (118,000 square feet) and Eaton Centre (112,000 square feet), while Dior, Saint Laurent and Gucci are advancing plans for flagship stores at Yorkdale’s expanded luxury wing.
Luxury retail commands disproportionate media attention relative to its actual market footprint, Smith noted. Based on his tenant representation work and developer advisory practice, luxury tenants occupy less than 20% of Yorkdale Shopping Centre’s gross leasable area despite the segment’s high-profile nature.
“Luxury is such a niche market,” Smith said. “There’s really only two lux markets in all of Ontario being the Bloor Yorkville urban node and then Yorkdale.”
Smith described luxury retail as “the prettiest girl at the prom, so to speak, that always gets the most amount of attention,” while emphasizing successful shopping center strategies require merchandising across multiple price points to generate the foot traffic and dwell time that drive overall occupancy and sales productivity.
“Although they might have a luxury wing now, they’ve really continued to focus on investing in mass market brands and first-to-market brands and things that are going to increase dwell time,” Smith said, citing Yorkdale’s balanced tenant mix that incorporates full-service restaurants alongside luxury boutiques.
Luxury brands continue strategic positioning in Canada’s highest-value retail real estate. Vancouver’s Oakridge Park and Montreal’s Royalmount both integrate luxury retail with high-end residential, Class A office space and public amenities. Oxford Properties is advancing construction on Yorkdale’s new luxury wing, which will house Canada’s first Maison Margiela location.
Despite heightened consumer focus on “Made in Canada” products and documented shifts in grocery purchasing behavior, Smith said the sentiment has not materially impacted retail real estate negotiations for Canadian apparel brands including Aritzia, Knix, Moose Knuckles and Kit and Ace.
“Leasing is driven by the tenant quality covenant, not origin,” Smith said. “While I would love to say that the Buy Canadian is allowing those guys to sharpen their pencil on a lot of deals, I think the reality is prominent groups like Aritzia, they’re thinking 24 or 36 months out.”
Grocers remain the primary beneficiaries of the Buy Canadian trend. Loblaw’s T symbol program—which identifies products subject to retaliatory tariffs—has successfully raised consumer awareness and shifted purchasing patterns toward domestic suppliers. Metro Inc. reported approximately 20% of vendor price increase requests are now tariff-related, affecting roughly 3,000 stock-keeping units across its network.
Starbucks has closed 40 Toronto-area locations since 2021, including closing 1% of total global stores last week, but Smith expressed confidence landlords will secure replacement tenants given robust demand for appropriately sized second-generation space in established trade areas.
“Starbucks always chooses great real estate and they’re all right-size units for the most part sub-2,500 feet,” Smith said. “I don’t anticipate that if those landlords are actively wanting to backfill those spaces, that that’s going to be a huge challenge.”
Smith attributed the closures to a strategic miscalculation during the pandemic, when Starbucks pivoted aggressively toward 1,000-1,500 square foot pickup-only formats without customer seating.
“In COVID, they pivoted to this pickup model of 1,000 square feet or 1,500 feet where they generally didn’t have any seating. And then coming out of COVID, they thought that might be the growth model moving forward,” Smith said. “But as it turns out, people do want to sit in coffee shops. They do want to have experiences.”
Hudson’s Bay closed 96 locations across Canada in June, including 19 Toronto stores. Smith acknowledged the closures create significant repositioning opportunities while noting JLL’s advisory role limits his ability to discuss specifics.
“I think it’s a phenomenal opportunity to repurpose the spaces whether it’s experiential retail, kind of new big box tenants that are looking to come in the market or demising to just provide a lot more overall use categories,” Smith said.
Discretionary spending accelerated unexpectedly during the first half of 2025 despite persistent consumer confidence concerns. Jewelry sales jumped 16% year-over-year. Leon’s Furniture posted record revenue for the six-month period with approximately 4% year-over-year growth. The used-car market reported robust sales increases as buyers moved ahead of anticipated tariff implementations.
JLL forecasts retail sales growth will decelerate in 2026 as U.S. trade tensions, GDP contraction and rising unemployment pressure consumer spending, before reaccelerating in 2027. Toronto’s GDP and employment growth are projected to outpace national averages despite lower population growth and broader economic uncertainty.
Smith’s team has completed several high-profile transactions in recent months, including Sweat and Tonic at 11 Yorkville (scheduled to open in 2026 and recipient of a Rex Award), Stock T.C. in the former Pusateri’s Bloor-Yorkville space, the Smeg flagship adjacent to Lululemon, and Queen’s Harbour restaurant spanning 23,000 square feet with Canada’s largest retractable roof. Smith reported five active offers on the Time and Space development at Front & Sherbourne, including soon-to-open golf simulator concept NextGolf.
Market conditions remain structurally favorable for landlords despite macroeconomic headwinds. Tenants continue requiring extended timelines to secure suitable space as availability rates persist at 1.6%—well below historical norms and among the tightest in North America.
Dustin Fuhs is the founder and Editor-in-Chief of 6ix Retail, Toronto’s premier source for retail and hospitality industry news. As the former Editor-in-Chief of Retail Insider, Canada’s most-read retail trade publication, Dustin brings over two decades of expertise spanning retail, marketing, entertainment and hospitality sectors. His experience includes leadership roles with industry giants such as The Walt Disney Company, The Hockey Hall of Fame, Starbucks and Blockbuster.
Recognized as a RETHINK Retail Top Retail Expert in 2024 and 2025, Dustin delivers insider perspectives on Toronto’s evolving retail landscape, from emerging brands to established players reshaping the city’s commercial districts.