RioCan is gaining a market advantage in Canada due to a significant shortage of new retail space construction [1].
This trend shifts bargaining power toward landlords, allowing companies like RioCan to raise rents as retailers struggle to find alternative locations. The lack of available inventory creates a bottleneck for businesses attempting to expand or relocate within the Canadian market.
Jonathan Gitlin, CEO of RioCan, said new retail spaces are at "historic lows," accounting for less than one percent of total inventory in Canada last year [1]. This figure excludes streetfront properties and spaces under 10,000 square feet [1]. Specifically, the inventory accounted for 0.9% of the total [1].
The scarcity of new developments means that existing properties have become more valuable. Because there are few new projects entering the pipeline, retailers have fewer options when renewing leases or seeking new footprints. This environment allows RioCan to leverage its existing portfolio to secure higher rental agreements [1].
Industry data suggests that the slow pace of construction has created a supply-demand imbalance across the country. While some sectors of the economy have seen rapid growth, the physical infrastructure for retail has not kept pace, leaving established landlords in a dominant position.
RioCan is capitalizing on this trend by optimizing its current holdings. The company is focusing on the ability to increase revenue from its existing tenant base while competitors wait for new construction that may not arrive soon [1].
“New retail spaces are at 'historic lows.'”
The scarcity of new retail construction transforms the Canadian commercial real estate landscape from a competitive market into a landlord's market. When inventory growth falls below 1%, the lack of substitute locations removes the primary leverage retailers use to negotiate lower rents, likely leading to higher overhead costs for businesses and potentially higher prices for consumers.
