What Happened

Swathes of retail space in Toronto are sitting empty as tenants have been evicted or have left, creating a vacancy crisis that developers are struggling to fill. This situation is an unanticipated consequence of a severe chill in the condominium market, which has forced major high-rise projects to be put on hold or cancelled entirely. A prominent example is the cancellation of the redevelopment of the 32-acre Cloverdale Mall project, a joint effort by Mattamy Homes and Quadreal Property Group. The cancellation occurred after only 10 per cent of the condos were sold, leaving the site in limbo. In response to the vacancy, the mall is now actively courting tenants back on its website. The City of Toronto released a report this week showing that retail businesses in the city declined by 10.5 per cent from 2011 to 2025. Some areas posted a decline three times as much as the city average. Landlords are now agreeing to longer leases to attract tenants because not many tenants want to spend money on short-term leases. Developers prefer passive income from tenants during land assembly, but the speed of development previously led landlords to want to get projects going quickly. Shaun Hildebrand, president of Urbanation, discussed the condo market with Larysa Harapyn of the Financial Post, highlighting the shift in developer behavior. Saba Haie, a partner at Amdev Property Group, also commented on the market conditions affecting retail space.

Why It Matters

The collapse of the Toronto condo market is creating a ripple effect that extends far beyond housing starts. When high-rise projects are cancelled or put on hold, the planned retail components vanish, leaving large parcels of land without the foot traffic needed to support commercial tenants. This creates a vacuum where landlords are left with empty spaces and no immediate buyers for the retail component. The situation highlights how tightly linked the residential and commercial real estate sectors are in major Canadian cities. A slowdown in one sector can quickly become a crisis in the other, affecting property values, municipal tax revenues, and the availability of services for residents.

Local Vancouver / Burnaby Context

While this report focuses on Toronto, the dynamics of retail space in high-density developments are relevant to the Greater Vancouver area. In Burnaby and Vancouver, the success of mixed-use projects often depends on the residential component driving foot traffic to ground-floor retail. If the condo market cools significantly, developers may face similar challenges in leasing retail space, leading to longer vacancy periods or a shift in lease structures. Local context from BC Housing Targets and CMHC reports indicates that housing supply and demand are closely monitored, but the commercial real estate side often lags in visibility until vacancies become acute. The trend of landlords offering longer leases to attract tenants is a sign of market correction that could eventually influence lease terms in Vancouver as well. However, Vancouver's market has shown different resilience patterns compared to Toronto's recent condo bust, with different zoning and development timelines affecting the speed of impact.

Market Impact

For owners of retail space in Toronto, the impact is immediate and severe, with vacancies rising and lease terms becoming more difficult to negotiate. For developers, the cancellation of projects like Cloverdale Mall means a loss of potential passive income during land assembly and a delay in realizing returns. The condo market slowdown is reducing the demand for new retail space, as fewer residential units mean fewer potential customers. This could lead to a correction in retail rents in Toronto, making it cheaper for businesses to lease space in the long term but harder for landlords to find tenants in the short term. The liquidity of commercial real estate assets may also be affected as investors reassess the risk of retail space in high-density developments.

Builder / Developer Perspective

Developers like Mattamy Homes and Quadreal Property Group are facing feasibility issues with large-scale mixed-use projects when the residential component stalls. The cancellation of the Cloverdale Mall project after only 10 per cent of condos were sold demonstrates the risk of over-leveraging on residential sales. Developers now prefer passive income from tenants during land assembly, but the lack of development activity means fewer opportunities for this income stream. The speed of development previously allowed landlords to get projects going quickly, but the current chill in the condo market has slowed this process. Builders may need to reassess their strategies for mixed-use projects, focusing on smaller phases or different retail formats that are less dependent on high-density residential foot traffic.

BurnabyHouse Insight

The Toronto retail vacancy crisis is a stark warning for Vancouver and Burnaby developers and investors. While the local condo market has shown different resilience, the interconnected nature of real estate means that a slowdown in one sector can quickly spill over. The shift towards longer leases and the cancellation of major projects like Cloverdale Mall highlight the need for developers to be more cautious in their financial planning and lease negotiations. For local readers, this story underscores the importance of monitoring the health of the residential market as a leading indicator for the commercial sector. The unanticipated consequences of the condo slowdown are already being felt in Toronto, and similar dynamics could emerge in Greater Vancouver if the market cools further.