Buying a retail.

FAQ

Retail FAQ — what buyers ask

Direct answers about retail buying in the GTA. Specific numbers, Ontario regulations, 2026 market data.

• What's the cap rate for retail in the GTA in 2026?

  Stabilized retail strip plazas trade at 5.5%-7.0% cap. Grocery-anchored plazas trade tighter (5.0%-6.0%) due to long covenant and essential-use tenancy. Standalone QSR/coffee box (Tim Hortons, McDonald's NNN ground-lease) trades at 4.5%-5.5%. Power centres trade 6.5%-7.5%. Mixed-use street retail (Queen West, Yonge-Eglinton) trades 4.5%-5.5% when the upper-floor residential is included.

• Should I buy a retail condo or lease space for my business?

  Lease vs. own depends on three factors: (1) holding period — own only if you'll occupy 7+ years. (2) Mortgage capacity — commercial mortgages require 30-40% down, vs. 0% down on a lease. (3) Capital allocation — money tied up in real estate isn't growing your business. Typical breakeven: ownership wins after year 5-6 if the property appreciates 3%+ annually and you'd otherwise pay $25+/sqft net rent.

• What's a typical net rent for retail in Toronto?

  Highly variable by location. Queen West / King West prime: $80-150/sqft net. Yonge-Eglinton: $65-95/sqft net. Bloor West Village / Roncesvalles: $40-65/sqft net. Suburban strip plaza: $25-40/sqft net. Power centre big-box (10,000+ sqft): $18-28/sqft net. Always add 35-50% for additional rent (TMI). Restaurants typically pay 1-2x retail rate because of fit-out depreciation + higher-revenue use.

• What's the deal with retail covenants and renewal options?

  Strong covenants (national chains, public-company tenants) trade at lower cap rates. Independent retailers are higher risk but pay 20-40% higher rent. Standard retail lease is 5 years with 1-2 renewal options at fair market rent. Negotiation points: percentage rent (typically 5-7% of gross sales over breakpoint), exclusive use clauses (you can't lease to a competing tenant within X feet), and co-tenancy (anchor leaving terminates the lease).

• How do mixed-use buildings (retail + residential above) work?

  In Toronto's CR (Commercial-Residential) zoning, ground-floor retail + 2-4 storeys of residential above is a common form. The retail typically generates 40-60% of NOI on 20-30% of floor area. Financing splits the building's debt across the two income streams. Best ROI: heritage main streets (Queen, College, Bloor West) where both retail and residential have strong upside. Worst: depressed retail strips where vacant ground floors drag the whole building's value.

• How do I evaluate a commercial property's cap rate?

  Cap rate = stabilized net operating income (NOI) ÷ purchase price. Calculate NOI by taking gross rental income, subtracting vacancy allowance (5-10%), operating expenses, property tax, and management fee — but NOT mortgage payments. Compare to current market cap for the property class + submarket. A property at 6.5% cap in a 5.5% market is either a deal or has hidden issues — investigate.

• What financing is available for commercial real estate in Canada?

  Standard commercial mortgage requires 30-40% down and amortizes over 20-25 years (vs. 25-30 on residential). Interest rates run 1.0-1.5% above 5-year GIC. CMHC-insured loans available on multi-family 5+ units — down to 15% down with insurance premium added. Vendor takeback (VTB) financing is common on $5M+ deals where the seller carries a second mortgage for 5-10 years.

• What's the typical due diligence process for commercial?

  30-90 day due diligence with conditions. Standard package: Phase I Environmental Site Assessment, property condition assessment (PCA), zoning certificate, rent roll + estoppels, tenant interviews (covenant strength), historical financials (3 years), Tenant + Service contract assignments, lease assignments. For industrial: add Phase II Environmental + soil testing. For multi-family: add LTB filing search. Budget $15-50k in third-party reports.