Mixed-use developments — buildings that combine residential units with retail or commercial space — are becoming a standard requirement in many Canadian municipalities. For developers and investors, this isn’t just a design preference. It’s a condition of approval that can reshape a project’s financials. A recent look at the sector shows that developers like Main + Main have a pipeline of nearly 7,000 residential units across Toronto, Ottawa, and Montreal, with roughly 2,000 already under construction. That scale tells you the market is moving, but the real question is whether the commercial component of these projects actually works financially.
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This article is general information only and does not constitute professional advice. For your specific situation, consult a qualified professional.
Municipalities across Canada now require many multifamily developments to include a commercial mixed-use component. That means a developer building a 200-unit apartment building may be told to include ground-floor retail, even if the location isn’t ideal for it. The commercial space in downtown, transit-oriented, walkable areas tends to lease well. In less central locations, it can sit empty for months or years after residents move in. That timing gap — commercial space often isn’t leased until near or after residential completion — creates a cash-flow problem that needs to be planned for from the start. Here’s what you actually need to know.
When you hear about mixed-use development, the term that matters most is the commercial component requirement. That’s the municipal rule that forces a developer to include retail, office, or service space in a residential project.
What I tend to notice is that developers who treat the commercial space as an afterthought end up with the worst outcomes. The ones who plan the mix from day one — thinking about what kind of tenant fits the neighbourhood, what the lease terms look like, and how the building’s layout supports both uses — tend to avoid the long vacancy periods that eat into returns.
What the current rate environment means for mixed-use projects
The numbers driving mixed-use development in Canada right now come down to three things: how many units are in the pipeline, how long they take to build, and what the commercial space actually earns. Main + Main’s 7,000-unit pipeline, with 2,000 under construction, shows that major players are betting on this model. But the commercial side is where the math gets tricky.
Killam Apartment REIT, with a $5.3-billion portfolio of roughly 18,000 units across Atlantic Canada, Ontario, Alberta, and British Columbia, owns several mixed-use assets. The company has development projects kicking off in four different markets in the coming months. That geographic spread matters because commercial leasing conditions vary by region. A retail unit in downtown Halifax leases differently than one in suburban Calgary.
Boardwalk REIT, based in Calgary, takes a different approach. The trust has about 500 units under development at any given time, with a pipeline of a couple thousand units for scaling over the next two to five years. Boardwalk focuses on purpose-built rental properties, largely accumulated through acquisitions. Their model shows that mixed-use doesn’t have to mean building from scratch — acquiring existing properties with commercial components already in place can skip the leasing uncertainty.
For a developer looking at a specific project, the key question is whether the commercial space will lease at all in that location. If the answer is uncertain, the financial model needs to account for a longer vacancy period. That might mean higher equity requirements or a lower overall return expectation. Some developers choose to partner with REITs or pension funds — Main + Main does exactly that — to spread the risk of the commercial component across a larger portfolio.
Where mixed-use development plans go wrong
Underestimating how long commercial space takes to lease
The most common error is assuming commercial tenants will line up before construction finishes. In practice, commercial space in mixed-use projects is often not leased until near or after residential completion. That means a developer might have 50 residential units generating rent while 5,000 square feet of retail space sits empty. For a project with a 200-unit building and 10,000 square feet of commercial space, that vacancy could cost $200,000–$400,000 a year in lost rent, depending on the market. The fix is to build a longer lease-up period into the financial model — 18 to 24 months of commercial vacancy is not unusual for less central locations.
Ignoring the location’s commercial viability
Not every neighbourhood can support a coffee shop or a pharmacy. Municipalities sometimes require commercial space in areas where foot traffic is low and visibility is poor. A developer who doesn’t push back or negotiate the requirement may end up with a white elephant. The research shows that commercial spaces in downtown, transit-oriented, walkable areas generally do okay, but it can be more difficult to fill them in less central locations. Before committing to a design, a developer should run a basic retail feasibility study — looking at population density, average household income, and existing competition within a 1-kilometre radius.
Misjudging provincial development timelines
Development timelines vary by province, and that affects when commercial space becomes available for lease. In Alberta, projects are taking longer to complete because many new housing starts from different companies are competing for the same trades and materials. In Ontario, condo starts have slowed, which has led more trades to submit bids for apartment construction projects — potentially speeding up timelines. A developer who assumes a 24-month build in Alberta might find themselves at 30 months, with commercial carrying costs piling up. The practical step is to check local building permit data and talk to general contractors about current trade availability before locking in a timeline.
Designing commercial space without tenant input
A common mistake is designing the commercial space before knowing what kind of tenant will occupy it. A restaurant needs different plumbing, ventilation, and electrical capacity than a retail clothing store. A medical office needs specific accessibility and privacy layouts. Retrofitting commercial space after construction is expensive and can delay leasing by months. The better approach is to design flexible shell space — high ceilings, open floor plans, accessible utility connections — that can be adapted to different tenant types without major structural changes. Some developers also pre-lease a portion of the commercial space before breaking ground, which locks in a tenant and reduces uncertainty.
How to structure a mixed-use development that actually works
Start with the commercial feasibility study
Before you draw a single floor plan, you need to know whether the location can support commercial use. That means looking at daytime population — how many people work within a 10-minute walk — as well as residential density. A site near a transit station with 5,000 office workers within walking distance has a much better chance of leasing retail space than a site on a suburban arterial road with no foot traffic. The study should also identify what type of commercial use is missing in the area. If there are already three coffee shops within two blocks, don’t design another one. If there’s no pharmacy or dry cleaner, that’s a gap worth filling. This research can also help you negotiate with the municipality — if you can show that the required commercial component won’t be viable, some cities will allow a reduced requirement or a cash-in-lieu payment.
Design for flexibility and phasing
The smartest mixed-use designs treat commercial space as adaptable shell space rather than finished, tenant-specific units. That means 4-metre ceiling heights, removable interior partitions, and utility stubs placed at regular intervals. This approach lets you market the space to a wider range of tenants — a gym needs different ceiling height than a dentist’s office, but both can work in a well-designed shell. Phasing also matters. If the residential component is built first and the commercial space is finished later, you can time the commercial construction to match tenant fit-out. That reduces the period where finished commercial space sits empty while you wait for a tenant. Some developers build the residential tower first, then add the commercial podium in a second phase once tenants are secured.
Partner with experienced operators
Main + Main’s model is instructive: the developer partners with REITs, pension funds, and other developers on specific projects. That spreads the risk of the commercial component across a larger balance sheet. For a smaller developer, a joint venture with a retail-focused real estate firm or a local commercial broker can provide the leasing expertise that residential developers often lack. The partner can handle tenant sourcing, lease negotiation, and property management for the commercial space while the residential developer focuses on what they know best. Killam Apartment REIT’s approach — owning mixed-use assets across multiple markets — also shows the value of geographic diversification. If commercial leasing is slow in one city, another market may be performing well.
Understand the municipal approval process
Every Canadian municipality has its own zoning bylaws, density bonusing rules, and community amenity contribution requirements. Some cities offer density bonuses — allowing more residential units in exchange for including affordable housing or public amenities — that can offset the cost of the commercial component. Others require community amenity contributions that fund public infrastructure. The approval process can take 12 to 18 months in some cities, and the commercial component is often the most negotiated element. Having a planning consultant who knows the local council and planning department can save months of back-and-forth. Boardwalk REIT’s focus on acquisitions rather than ground-up development is one way to bypass this entirely — buying an existing mixed-use building with approved commercial space avoids the approval timeline altogether.
Plan for the emerging regulatory landscape
Several Canadian municipalities are updating their official plans to require more mixed-use development, particularly around transit stations. Ontario’s provincial policy statement now encourages transit-oriented development with higher densities and mixed uses. British Columbia’s recent housing legislation requires municipalities to allow more density near transit. These changes mean that the commercial component requirement is likely to become more common, not less. Developers who build expertise in mixed-use now will have an advantage as these policies roll out. The flip side is that more supply of mixed-use commercial space could make leasing more competitive — a developer who builds today may face less competition for tenants than one who builds in three years when more projects are complete.
Frequently asked questions about mixed-use development in Canada
Can I negotiate the commercial component requirement with the municipality? ▾
How long does commercial space typically sit vacant in a mixed-use project? ▾
What type of commercial tenant works best in a mixed-use building? ▾
Does the commercial component affect financing for the project? ▾
Are there tax advantages to including commercial space in a residential development? ▾
How do development timelines differ between Ontario and Alberta right now? ▾
The commercial component is the make-or-break variable
The single biggest financial risk in a mixed-use development isn’t the residential side — it’s the commercial space that municipalities require but don’t guarantee will lease. Developers who treat that space as a compliance checkbox rather than a revenue-generating asset end up carrying vacancy costs that can wipe out the residential profit margin. The developers who succeed — Main + Main with its partnership model, Killam with its diversified portfolio, Boardwalk with its acquisition strategy — all have a plan for the commercial component before they break ground. That plan includes a realistic lease-up timeline, flexible design, and a clear understanding of what the local market can support.
Remember: this article is general information only. For advice on your specific situation, speak to a qualified professional.
If this was useful, you might also want to read Understanding Short-Term Rental Zoning Laws in Canada.
Sources and Further Reading
Tips for Analyzing Rental Absorption Rates in Canada — A practical guide to understanding how quickly new rental units are absorbed in different Canadian markets, directly relevant to planning commercial lease-up timelines.
Effective Strategies for Real Estate Syndication in Canada — Explains how pooling capital with other investors can fund larger mixed-use projects and spread the risk of commercial components across multiple partners.
RENX (2025). Mixed-use multiresidential growing Canada development sector. 🔗
RENX (2025). Main + Main development pipeline and partnership model. 🔗
RENX (2025). Killam Apartment REIT portfolio and mixed-use assets. 🔗
RENX (2025). Boardwalk REIT development pipeline and acquisition strategy. 🔗
