Beyond the Big Box: Primaris’ Bet on the New Canadian Mall

TORONTO, ON – December 10, 2025 – The final curtain has fallen on an icon of Canadian retail. With the last of Hudson’s Bay Company’s (HBC) leases disclaimed, the era of the monolithic department store anchor has officially ended. But where some see a void, Primaris REIT, Canada’s only enclosed shopping centre-focused real estate investment trust, sees a multi-billion-dollar opportunity. The company is embarking on one of the most ambitious retail transformations in recent history, reclaiming 1.3 million square feet of prime real estate and betting that the future of the mall lies not in a single, oversized box, but in a dynamic mix of retail, residential living, and community experience.

An Opportunity Decades in the Making

For years, investors have viewed the slow decline of department stores as a looming threat to shopping centres. The closures of Eaton’s, Sears, and Target left behind cavernous, hard-to-fill spaces and restrictive lease terms that often stifled innovation. Primaris, however, portrays the exit of HBC not as a problem to be solved, but as a strategic windfall.

The REIT now has full control over these spaces, which, according to its leadership, have been underutilized for years. "We have regained control of space that has gone many years without investment, giving us the opportunity to revitalize and dramatically improve the productivity of some of the best located, but recently least productive space in our portfolio," said Alex Avery, Chief Executive Officer of Primaris.

The numbers tell a stark story. At the time of their departure, the 11 HBC locations paid an average minimum rent of just $4.18 per square foot. This pales in comparison to the portfolio's weighted average net rent of over $31 per square foot for other tenants. This massive gap represents a significant, built-in opportunity for income growth as new leases are signed at market rates.

This is the final chapter in a long story of department store decline, but as Primaris COO Patrick Sullivan noted, it's unfolding in a uniquely favorable environment. “It is an incredible time in the retail property landscape to regain control of these spaces, with a strong landlords’ leasing market and no shopping centre development underway,” he stated, highlighting the strong inbound interest from new tenants.

A Landlord's Market and the New Tenant Playbook

Primaris’s confidence is bolstered by powerful macroeconomic tailwinds. Canada has seen minimal new retail space development over the last decade, while its population has surged by 17%. This combination of constrained supply and rising demand has created what analysts describe as a "strong landlord's market," giving property owners significant leverage in negotiations.

The strategy is not to find another department store. Instead, Primaris is executing a modern playbook focused on diversification and "internet-resistant" tenants. The plan is twofold: re-leasing some locations to single or multiple large-format users and redeveloping others entirely. Already, 516,000 square feet of former HBC space have been leased with minimal capital outlay. A prime example of this strategy in action is the former Sears space at Lime Ridge Mall in Hamilton, which will soon house a 139,000-square-foot Walmart on a 20-year lease.

This shift reflects a broader industry trend. Today's most sought-after tenants are those offering value, necessity, or experience. This includes discount retailers, grocery chains, fitness centres, and food halls—businesses that provide a compelling reason for consumers to visit in person. The new tenant mix will not only be more profitable but will also create a more resilient and diverse ecosystem, moving away from the risk of relying on a single, massive anchor. The mall itself, through its collection of specialized retailers and experiences, becomes the primary draw.

From Shopping Centre to Community Hub

Perhaps the most transformative aspect of Primaris's strategy lies beyond retail. The departure of HBC also liberated 70.8 acres of land from decades-old "no-build" and parking restrictions. This previously sterilized land is now the foundation for the REIT's pivot into mixed-use development.

"Perhaps even more impactful is the 70.8 acres of land no longer subject to 'no-builds'," Avery explained, noting that the value of these lands "substantially exceeds the entire cost" of the redevelopment plans. Primaris estimates the value of this unlocked land at between $150 million and over $250 million.

Master plans are already underway for approximately 6,300 residential units across four properties: Les Galeries de la Capitale in Quebec City, Orchard Park in Kelowna, Place d’Orleans in Orleans, and Sunridge Mall in Calgary. This move taps directly into Canada’s pressing need for more housing, driven by rapid urban population growth. By integrating residential towers into its mall properties, Primaris is not just adding a new revenue stream; it is creating built-in, 24/7 communities around its commercial assets. These future residents will become the malls' most convenient and consistent customer base.

This "densification" strategy is a hallmark of the 21st-century urban planning, transforming sprawling suburban-style centres into walkable, high-density hubs where people can live, work, shop, and be entertained within a single ecosystem. While navigating zoning regulations and municipal approvals presents a challenge for any such large-scale project, the alignment with national housing priorities and urban growth trends provides powerful momentum.

A Calculated Bet on the Future

The scale of this undertaking is immense, with total repositioning costs estimated at $125 million to $150 million for the HBC spaces alone. However, Primaris projects strong yields of 7% to 12% on these capital investments, driven by the dramatic uplift in rental income and the value created through redevelopment.

This is not a desperate scramble to fill vacancies; it is a calculated, forward-looking investment in the evolution of physical commerce. Having learned from the successive failures of department store chains over the past three decades, landlords like Primaris understand that the old model is broken. The response is not to patch the holes, but to rebuild the ship with a new design.

By replacing low-rent, low-traffic anchors with a diverse roster of high-performing retailers and layering in thousands of residential units, Primaris is fundamentally de-risking its portfolio and creating multifaceted assets built for the modern economy. This transformation serves as a powerful case study for how legacy retail infrastructure can be reimagined, proving that the death of the department store may be the best thing to ever happen to the Canadian mall.