Across Canada’s commercial real estate landscape, the gap between market narratives and ground-level reality is widening. Industrial rents are stabilizing after years of sharp increases, retail is holding firmer than headlines suggest, and restaurants are struggling under a combination of high renewal rents and shrinking margins. For legal practitioners working daily across all three asset classes, the picture is more nuanced than any single trend line can capture.
Cassandra Da Re, Partner at Dale & Lessmann LLP, and chair of the firm’s commercial leasing department, has spent 12 years navigating leases across retail, office, and industrial sectors in Ontario and nationally. Her practice spans both landlord and tenant mandates, a dual perspective she considers a genuine advantage. “I have always worked landlord and tenant side, and I’ve always found it to be the most beneficial, because you get a market analysis and sense of what’s happening from two completely different perspectives,” she explains.
The industrial sector, which saw dramatic rent escalation during the e-commerce and pandemic boom, is now entering a more measured phase. After years of underinvestment between roughly 2017 and 2022, demand for warehouse and distribution space surged, pushing rents sharply higher and triggering a wave of new development. That cycle is now moderating.
Da Re notes that rents are leveling off in Q2 2026, with even a slight decline, though they remain well above pre-COVID levels. On the occupancy side, the picture is straightforward: tenants are paying, renewing, and in many cases seeking longer terms. Defaults in this segment are rare.
Despite persistent predictions that e-commerce would hollow out physical retail, consumer behavior has proven more complex. Canadians are still shopping in person, often researching online before visiting stores, blending digital and physical channels in ways that keep both warehouse and storefront demand alive simultaneously.
While retail broadly is holding up, the restaurant segment is under particular strain – and the source of that pressure is partly structural. Many operators are now facing lease renewals tied to rates negotiated during the 2021 to 2023 period, when rents climbed sharply. Standard lease language often prevents renewal rents from falling below the preceding term’s base rent, locking tenants into elevated costs at a moment when food prices, supply chain expenses, and shifting consumer habits are all compressing margins.
Da Re describes a convergence of high bankruptcy rates, lower menu ticket items, and rising food costs that creates “the perfect storm for restaurants to be struggling right now.” The result is an increasing number of operators attempting to negotiate rents down to levels their businesses can actually sustain, a conversation that is becoming more common across her files as she heads into the second half of 2026.
When tenants approach landlords for relief, the outcome depends heavily on context. Landlords are generally reluctant to give ground but are aware of the cost of vacancy. A rent deferral or blend-and-extend arrangement may prove beneficial in the long term, particularly if the landlord can negotiate a new indemnifier as part of the deal. “There’s a lot of good in keeping a tenant and not just kicking them out,” Da Re says.
The office market, particularly in downtown Toronto, has moved meaningfully from the distress of a few years ago. Surrenders, defaults, and rent deferrals that characterized the post-pandemic period have given way to returning occupancy and tightening vacancies. Employers are bringing staff back, and the market is absorbing space that was previously given up.
The main adjustment is one of footprint rather than commitment. Some tenants are returning to the office but taking less square footage than before. In practice, this is creating opportunities rather than problems, as other tenants absorb the released space. For larger office tenants, landlords are competing through inducements that go beyond traditional fit-out allowances – fitness centers, end-of-trip facilities, and in some cases, on-site daycare. “The office buildings are evolving to make it attractive for big, financially sound office tenants to come and attract their employees to come back to work,” Da Re notes.
After a brief pause during the height of tariff tensions in early 2025, cross-border franchise expansion has resumed. The announcement that Foodtastic has secured Canadian franchise rights for Dunkin’ Donuts, with plans to open hundreds of locations starting in Quebec, scaling from one per month to one per week, is a visible example of the activity now underway.
That expansion will run directly into a constrained supply environment. Ontario, in particular, has limited retail development in the pipeline, and vacancy rates are already low. The combination of high demand and limited new supply is likely to push rents higher for quick-service restaurant formats, even as those operators face the margin pressures described above.
US franchisors entering Canada also encounter a leasing environment that does not behave the way they expect. Canada has lost most of its major anchor tenants over the past decade, including Target, Nordstrom, and, most recently, Hudson’s Bay, leaving fewer operators with the covenant strength that commands significant concessions. Da Re explains that in Canada, landlords rely on standard-form leases with limited deviation. “US tenants shouldn’t expect to get the same kind of beneficial, customized treatment that they’re used to in the United States,” she says.
The franchise leasing structure itself adds complexity. A shift that began roughly 15 years ago moved franchisors away from signing leases directly and subleasing to franchisees, toward arrangements where the franchisee signs directly with the landlord. This reduced franchisor liability but created new negotiating pressure from landlords seeking guarantees from a financially credible party.
As operating costs have risen alongside inflation, one area that has moved to the center of lease negotiations is additional rent, sometimes referred to as CAM, TMI, or operating costs, depending on the market. Tenants were hit with bills that disrupted their financial projections, and the response has been a greater focus on what is included and excluded from those calculations. Increasing pressure to negotiate caps or controls on annual increases is now standard in Da Re’s practice. “We’re looking more carefully at what those increases can be annually, and whether we can negotiate some sort of cap or control, or balancing mechanism,” she says.
Looking further ahead, commercial leasing practitioners across Canada are watching how changes to the Competition Act, made a few years ago, will affect standard lease provisions. Those amendments brought exclusivity and restrictive use clauses into potential conflict with competition law. Still, the case law interpreting how those rules apply in a leasing context has not yet developed.
Da Re says the question of how courts and the Competition Bureau will evaluate the enforceability of these clauses remains open. “We have not seen very much case law or investigation that actually applies the new laws to leases, but we know it’s coming,” she says. Given that nearly every commercial lease in Canada includes some form of exclusivity or restrictive use provision, the eventual resolution will have broad practical implications across the market.
About the Expert: Cassandra Da Re is a partner and chair of the commercial leasing department at Dale & Lessmann LLP, with a practice spanning retail, office, and industrial leasing across Ontario and nationally in Canada. Her work covers lease drafting, negotiation, and enforcement across all major commercial property types.
This article is based on information provided by the expert source cited above. It is intended for general informational purposes only and does not constitute legal, financial, or real estate advice. Readers should conduct their own research and consult qualified professionals before making any real estate or financial decisions.
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