Canada’s retail development pipeline is getting thinner just as retailers are crowding into the kinds of centres developers are still willing to build.

Retail construction starts have fallen more than 40% in 2026 to their lowest level in a decade, according to JLL’s fall retail market report. Space under construction dropped to 4.9M SF nationally in the second quarter, down from a 6.2M-SF peak in early 2025.

The pullback is not happening evenly. Developers are largely steering away from malls and power centres and concentrating new construction in neighbourhood centres and storefront retail serving everyday needs.

Grocery has become the clear favourite. JLL found 96% of daily-needs centres completed since 2022 are grocery anchored, up from 74% between 2016 and 2021. The report calls grocery a “low-risk anchor format for investors and developers alike,” reflecting how the sector performed through the pandemic and the continued appetite for necessity-based retail.

Alberta offers some of the clearest examples. Calgary has been Canada’s busiest daily-needs development market over the past decade, with the Costco-anchored Bingham Crossing and Walmart and Real Canadian Superstore projects at Taza serving expanding residential trade areas. Calgary alone has 2.1M SF under construction.

Toronto is facing a different version of the squeeze. Space under construction has fallen more than 50% year over year and first-half leasing dropped 15% to 1.3M SF.

JLL’s explanation is straightforward: “When there is not much meaningful to lease, leasing falls.”

The GTA is still seeing development where population growth can support it, including Costco and Fortinos projects in Halton Region.

National asking rents reached $32.43 per SF in the second quarter, although annual growth slowed to 2.5% from a 4.9% peak in late 2022.

With vacancy still just 2.5%, fewer projects coming out of the ground could make the search for well-located retail space increasingly difficult.

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