SmartCentres Real Estate Investment Trust (SRU-UN-T) reported an industry-leading, in-place and committed occupancy of 98.6-per cent in its retail properties while its overall year-end net operating income (NOI) rose by $20.02 million from a year earlier.

“SmartCentres continued its strong performance in Q4, closing out 2025 with strong same-property NOI growth, high occupancy levels, competitive rental lifts, higher FFO (funds from operations) and developments on schedule, while maintaining a conservative balance sheet,” chief executive officer Mitchell Goldhar said to open a Feb. 12 conference call about the REIT’s financial and operational performance for the year ended Dec. 31.

“At the property level, performance across all sectors throughout the country — retail, industrial, residential, storage and office — are all experiencing healthy short- and long-term growth with high tenant retention.”

In addition to SmartCentres’ 155 retail properties, the Toronto-based REIT owns 14-self-storage properties, four office properties, three residential properties and one industrial property. It has 21 properties under development.

Leasing activity

Strong interest from tenants resulted in the leasing of 430,000 square feet of vacant space and an additional 125,000 square feet of new-build retail in 2025.

The REIT extended 88 per cent of the 5.3 million square feet of space that matured during the year with rent growth of 6.3 per cent.

“Retail demand for our high-traffic centres has allowed us to expand into complementary uses, with medical, daycare, entertainment, racquet and sports facilities,” said executive vice-president of portfolio management and investments Rudy Gobin.

Toys "R" Us filed for protection under the Companies’ Creditors Arrangement Act this year, but SmartCentres had already terminated six of its leases and taken control of the spaces based on advanced lease negotiations to backfill them at higher rents. 

“We are exchanging paper on four of the six already, which is fantastic,” Gobin said.

Retail development activity

A new Walmart store was added at a shopping centre in Oakville, Ont. in the fourth quarter. Construction of a 200,000-square-foot Canadian Tire store on Laird Drive in Toronto continues on schedule, with possession expected in the third quarter of this year.

A site plan approval submission was made to add 85,000 square feet at the Toronto Premium Outlets shopping centre in Halton Hills, Ont., for which some tenants have already signed leases. Construction is planned to start this summer and will include a four-storey parking garage. 

Goldhar expects to start construction of 200,000 to 300,000 square feet of retail space this year and for that number to rise over the next five years as major grocers, Costco, TJX-owned brands, Walmart and other large space users are looking to grow. He anticipates acquiring “quite a few” new shopping centre development sites across Canada to facilitate this.

“The good news is that the demand for new space is mostly single-storey retail with at-grade parking, which means that within a year or so of commencement of construction we should be collecting rent,” Goldhar said. 

Other development activity

Three self-storage facilities were completed in 2025 while an additional four sites are under construction and four more are in the process of obtaining municipal approvals.

Goldhar thinks “the honeymoon is over” with self-storage facilities, but he still expects to selectively add more at shopping centres and other sites.

Construction of the first phase of Vaughan NW townhomes is virtually complete. As of Dec. 31, 118 of the 120 units have closed. SmartCentres owns 50 per cent of the project.

Construction of the ArtWalk Condos' Tower A in the Vaughan Metropolitan Centre continues to advance and approximately 93 per cent of its 340 units have been sold. Initial closings on completed units are expected to start in 2027. SmartCentres also owns 50 per cent of that project.

“Residential is still very desirable as a use, but very skinny in terms of returns,” Goldhar observed. “It will be more core ultimately because we have a lot of permissions, but that's five to 10 years from now.”

Recycling capital

SmartCentres has total unencumbered assets of $10.03 billion and a debt-to-aggregate-assets ratio of 44.4 per cent. It has more than $1 billion in liquidity.

The trust anticipates selling one asset in order to recycle capital and the disposition of some non-income-producing land could potentially follow. Goldhar said SmartCentres has been approached by parties interested in using some of those sites for mid-rise or seniors housing.

“Market conditions seem to be improving for capital recycling and dispositions,” Goldhar said. “We are currently starting to focus on the improved sentiment in terms of the buyer pool.”