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Retail construction starts in major Canadian markets dropped to 1.5 million square feet in the first half of 2026, the lowest in a decade, according to commercial real estate firm JLL. The decline is making it harder for retailers to find space to grow.
Retail construction starts in major Canadian markets fell to their lowest level in a decade during the first half of 2026, according to commercial real estate firm JLL.
JLL says retail construction starts amounted to 1.5 million square feet in the first half of this year. That was down from 2.7 million square feet a year prior and 5.3 million square feet in the first half of 2016. The previous low during the decade came in 2023, when retail construction starts totaled 1.9 million square feet. The latest figure is even lower, marking a new 10-year trough.
Paul Ferreira, JLL's senior vice-president of retail, attributes the drop in starts to rising building costs. He also points to the redevelopment of existing retail space and the cancellation of some residential projects that would have had stores on the ground floor. Ferreira says the decrease means retailers wanting to grow are finding it more challenging to rent space. They are having to increasingly adapt their plans to work in the fewer new locations out there.
The trend comes as store owners already face a tough search for rental property. With less new retail space being built, competition for available units is likely to intensify. JLL tracks construction activity across major Canadian markets. The first-half 2026 figure of 1.5 million square feet is the lowest since at least 2016, based on the decade-long comparison.
In 2016, retail construction starts were 5.3 million square feet in the first half. By 2025, that had fallen to 2.7 million square feet in the same period. The 2023 low of 1.9 million square feet had been the previous decade record. The new 1.5 million square feet figure is 21 percent below that earlier low.
Ferreira's explanation points to a mix of cost pressures and broader development shifts. Rising building costs make new retail projects less viable. Redevelopment of existing retail space can also take units offline temporarily or change their configuration. Cancelled residential projects that would have included ground-floor stores remove another source of new retail space.
Those mixed-use developments often provide small-format units that are attractive to retailers. With fewer new locations available, retailers that want to expand must adjust their plans. They may need to consider different markets, formats or lease structures to secure space. The decline in construction starts is a key indicator for the retail real estate market.
It suggests that the pipeline of new space will remain limited in the near term. For store owners, the tighter supply could mean higher rents in desirable locations. It could also mean longer searches and more competition for the available units. JLL's data covers major Canadian markets.
The firm is a global commercial real estate services company that tracks trends in leasing, investment and construction. The first half of 2026 saw just 1.5 million square feet of retail construction starts. That is less than a third of the 5.3 million square feet recorded in the first half of 2016. The drop from 2.7 million square feet in the first half of 2025 to 1.5 million square feet in 2026 represents a 44 percent decline year over year.
Compared with the previous decade low of 1.9 million square feet in 2023, the 2026 figure is down by about 400,000 square feet. Those numbers underscore the scale of the slowdown in retail construction. They also help explain why retailers are finding it harder to secure space. Ferreira's comments highlight that the challenges are not limited to one factor.
Building costs, redevelopment and residential project cancellations are all contributing. Retailers may need to be more flexible in their expansion strategies. They might consider renovating existing stores, taking space in mixed-use projects that are still moving forward, or waiting for market conditions to improve. The low construction levels could also affect landlords and developers.
Tight Supply Shapes Canadian Retail Outlook
Less new supply may support rents in existing properties, but it also limits opportunities for new retail concepts to enter the market. JLL's report provides a snapshot of the retail real estate landscape in Canada. The 10-year low in construction starts is a significant milestone for the sector. As the market adjusts, retailers and landlords will be watching for signs of a rebound in construction activity.
For now, the data points to a constrained environment for retail expansion. The Canadian Press first published this report on Oct. 2, 2026.
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CTVToronto:Retailers face tougher search for space as construction drops to 10-year low: JLLThis story was compiled and edited by the HeadTopics newsroom and HT AI from the reports above.
Construction Retail Retail Construction JLL Canada Retail Real Estate Paul Ferreira Retail Space Shortage
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