Ontario’s outdated property assessments are an added hitch for retail landlords now contemplating vacant anchor spaces in dozens of regional shopping centres throughout the province. The Hudson’s Bay Company’s (HBC) insolvency will soon empty out prime spaces in more than 70 major malls in seven Canadian provinces, in some cases leaving multiple shopping centres in the same city grappling to find new tenants.

Depending on how long that takes, operators of the nearly 30 affected malls in Alberta and British Columbia can at least expect a relatively quick and straightforward reflection of their altered circumstances on their property tax bills. Those two provinces enjoy the commonly acknowledged gold standard in property assessment practices, premised on annual updates of market values and the assessment roll.

Looking east, Ontario property tax is still apportioned to ratepayers from the lens of 2016 market dynamics and there has been no indication when a reassessment might occur. Five years have now elapsed since the provincial government postponed that exercise and, with that, a new four-year assessment cycle that had been scheduled to begin in 2021. A series of subsequent delays followed — most recently in 2023, when the government announced it was undertaking a review of the assessment and property tax system.

“Since 2020, many shopping centres in Ontario have sold for less than half their assessed value,” observes Ryan Fagan, head of property tax with property tax consulting firm, Ryan ULC. “Due to the provincial assessment freeze, current economic conditions do not impact property taxes. Shopping centres and their tenants continue to pay an unequitable high proportion of the property tax burden.”

Few easy routes for tax relief

Commercial ratepayers, in general, have increasingly been turning to the available channels to question the validity of their property assessments: an option to consult with Ontario’s assessment authority, the Municipal Property Assessment Corporation (MPAC), known as a request for reconsideration (RfR); and/or an appeal to the provincial Assessment Review Board (ARB).

Knowledgeable onlookers suggest retail landlords with newly empty anchor space may realize some collective benefits from sharing information and strategies for conferring with MPAC, and filing appeals where necessary and possible. Robert Brazzell, managing director of Colliers Canada’s property tax services in Ontario, hypothesizes affected landlords could credibly argue the loss of business value related to an anchor tenant’s departure.

That would include factors such as an increase in non-recoverable operating expenses with the vacancy of the anchor space and detrimental impacts on rental rates due to associated destabilization of other retail tenants and/or a decline in customer traffic. In some cases, loss of an anchor tenant might bump a property into a different category under MPAC’s definitions — for example, shifting it from a regional to a community mall — which would mean a more favourable assessment from a tax perspective.

“If you have demonstrable evidence that will illustrate how that loss of an anchor impacts the performance of your property, you’re going to want to get that in front of MPAC or in front of the Board,” Brazell says.

Meanwhile, a previously available relief mechanism has evaporated since the last time there was a large-scale, simultaneous exit of anchor tenants from Ontario’s malls. When Target departed the Canadian market in 2015, many ratepayers were able to claim the then-available vacant unit tax rebate, which provided 30 per cent compensation of property tax paid on a commercial unit that was vacant for 90 or more days in a tax year. Beginning in 2017, the Ontario government allowed municipalities to opt out of providing that rebate.

“It has been eliminated by all but a very few jurisdictions,” Brazzell notes. “So the two most straightforward approaches for dealing with this would be a reassessment, which we still don’t have, or the vacancy rebate, which is not available anymore.”

Varying schedules for roll preparation

Quebec presents varying prospects for property tax relief at 10 malls HBC will be vacating (or possibly 12, if the company’s plan to continue operating in some locations is not successful). The province has a three-year assessment cycle, which resets on three different schedules depending on the region.

Quebec City, Laval and Sherbrooke are in the first year of the 2025-27 cycle, with assessments pegged to market values as of July 1, 2023. Montreal and surrounding municipalities are in the last year of the 2023-25 cycle, with new assessments for 2026 to be based on July 1, 2024 market values. Gatineau is at the midway point of the 2024-26 cycle, with assessments for the next 2027-29 cycle to be based on market values as of July 1, 2025.

“To modify a value entered on the roll, an ‘event’ must occur under section 174 of the Act respecting municipal taxation, and the departure of an anchor tenant such as La Baie does not correspond to any event within the meaning of the law,” explains Roxanne Carrier, an évaluateur agréé (certified appraiser) and associate with GDA services immobiliers intégrés in Quebec City. “In the past, we have unfortunately never seen tax relief for such situations.”

Even so, she speculates that this could be an expedient time for affected retail landlords in the Montreal region to negotiate with municipal assessors since the new assessment roll for 2026-28 won’t be formally registered until this fall. “In the case of Quebec City, depending on what happens next, if the space has not been re-leased or redeveloped, this could be reflected in the value of the 2028-30 roll,” she adds.

In contrast, annual assessment cycles in Alberta and British Columbia unfurl with just six months of lead time. In both provinces, assessments in any given year are pegged to market values on July 1 of the previous year.

Tariff uncertainty clouds retail outlook

Affected landlords will clearly be hoping anchor space vacancies are not long-lasting regardless of where they’re located, and Canada’s retail prospects were seen to be upbeat prior to the recent uncertainty tied to tariff threats and other United States government hostility. Retail was the best performing sector in the MSCI-REALPAC Canada Property Index in 2024, delivering an average total return of 6.5 per cent, while the regional and super-regional mall subclass recorded an average total return of 6.1 per cent, after negative returns earlier in the decade.

“Retail was on the rebound in 2024. Consumers were back into the malls; the returns and rental rates were starting to move up again, especially within the regional malls,” affirms Raymond Wong, vice president, research and data services, with Altus Group. “The challenge we have right now is potentially another economic slowdown, based on tariffs and people becoming a little bit more concerned about their job security.”

HBC’s departure is likely to present a differing degree of challenges across the entire scope of affected malls. For some, Wong predicts it may be an opportunity to fairly quickly exchange a financially tenuous tenant at below-market rent for more stable, lucrative replacements, while, for others, repositioning anchor space will be more arduous. And it should be easier for everyone if Canada-U.S. tensions ease.

“Retailers and other companies do have a mid- to long-term strategy when they’re making decisions so I think it’s a matter of getting through the noise over the next, hopefully no more than three to six months,” Wong reflects. “The other thing to consider is that a lot of the landlords involved are experienced and large companies that have room for that adjustment. They know how to navigate to be able to weather the storm.”

That doesn’t mean they’re not interested in property tax fairness. Brazzell warns that extended gaps between reassessments — whether that’s three years in Quebec or nine years and counting in Ontario — risk bridging over economic downturns. Ontario’s delays have notably missed the impact of the COVID-19 pandemic on the retail sector.

“By the time there’s a reassessment, they’re likely going to be performing well again,” Brazzell muses. “So they never got any relief. They missed an entire cycle that should have been reflected in terms of property taxes.”

“Owners and tenants of struggling shopping centres or half-vacant office buildings have no recourse but to pay excessive taxes in the current property tax legislative environment in Ontario,” Fagan concurs .

The most recent official word, in the Ontario government’s 2024 fall economic statement, is that a review begun in 2023 is still ongoing.

“The government is continuing to review the property assessment and taxation system, focusing on fairness, affordability, business competitiveness and modernized administration tools. Provincewide property tax reassessments will continue to be deferred until this work is complete,” the fall economic statement declares. “Through this review, constructive input has been received from municipalities, business representatives, property tax professionals and other stakeholders.”