The Canadian real estate investment trust sector has gone nowhere over the past year on a market-capitalization basis, with the aggregate value of publicly traded REITs sitting at $76 billion — unchanged from where it stood at last year’s RealREIT conference, according to David Holden, managing director and co-head of Canadian real estate investment banking at RBC Capital Markets Real Estate Group. Speaking at the Sept. 16 event in Toronto, Holden noted the figure remains well below the sector’s record high of $101 billion and dwarfed by the $1.6-trillion U.S. REIT market.
The stagnation masks divergent trends beneath the surface. Holden said growth in several sub-sectors was offset by a wave of privatizations, most notably in multi-residential REITs. The sector lost Dream Residential REIT, European Residential REIT, InterRent REIT and Minto Apartment REIT to take-private deals, erasing an aggregate $3.5 billion in equity market capitalization that had contributed to the prior year’s totals.
Retail and Seniors Housing Lead, Office Lags
Retail remains the dominant property type in the Canadian REIT universe, accounting for 46 per cent of the market — up three percentage points from a year earlier — followed by seniors housing at 17 per cent, which climbed seven points. Residential fell seven points to 15 per cent, reflecting the string of privatizations in that category. By performance, seniors housing was the standout for a second straight year, delivering a 47 per cent total return after posting 34 per cent in the prior 12-month period, Holden said. Retail and industrial each returned 17 per cent, while diversified, residential and office REITs all posted negative returns. Overall, Canadian REITs delivered a price return of minus one per cent over the past 12 months, offset by distributions to produce a total return of four per cent — matching the total return from the prior period, when price performance was minus three per cent.
That lagging office performance is visible at the company level. Allied Properties REIT (TSX:AP.UN) units fell 4.06 per cent amid what Kalkine Media described as continued office-market pressure, earnings concerns and distribution risk weighing on investor sentiment. H&R Real Estate Investment Trust (TSX:HR-UN), whose diversified portfolio spans office, residential and other assets, is meanwhile navigating a proposed major acquisition transaction alongside its latest quarterly results, with occupancy, leasing activity and financing conditions all under scrutiny as the deal moves toward completion, according to Kalkine Media.
Bond Yields and Refinancing in Focus
Rising bond yields are adding another layer of pressure. An analyst cited by Investing.com Canada warned that Canadian REITs face cap rate risk as bond yields climb, a dynamic that can compress valuations by pushing up the returns investors demand relative to property income. Against that backdrop, refinancing activity has become a focal point for individual trusts. Choice Properties Real Estate Investment Trust (TSX:CHP.UN) closed a $300-million private placement of senior unsecured debentures carrying a 4.836 per cent coupon and maturing in 2033, with proceeds earmarked to help repay $350 million of debentures due in November 2026. Choice Properties’ units traded at $14.96, down 8 per cent over 90 days even as the one-year total shareholder return reached 6.75 per cent and the five-year return stood at 35.57 per cent. The trust’s price-to-sales ratio of 3.4 times trailed the North American retail REIT industry average of 6.3 times and a peer average of 5.4 times, on revenue of $1.46 billion.
Holden’s presentation also pointed to a broader financing squeeze: sector-wide liquidity, measured as cash plus available credit as a percentage of total debt, stood at 16 per cent, down from 17 per cent a year earlier, though still near the high end of readings going back to 2009. Leverage improved in the industrial and seniors housing sub-sectors but rose in office, residential and diversified REITs, while retail leverage held steady.
Discounted Valuations Fuel M&A and Buybacks
With REIT units trading at a discount to net asset value while private markets continue to price real estate at a premium, mergers and acquisitions have picked up. Holden counted six M&A deals over the past 12 months, several of them related-party transactions in which an insider or major equity or debt holder of the target took the business private, betting on long-term real estate value the public markets weren’t recognizing. Slate Grocery REIT and Plaza Retail REIT are both currently in play as acquisition targets. Trusts have also stepped up unit buybacks to capitalize on the NAV discount, with the most activity concentrated in the residential, industrial and retail sectors so far this year.
New issuance has been modest by historical standards at roughly $2 billion over the past 12 months — an improvement on 2023 and 2024 but tracking about $300 million behind 2025’s $2.3-billion total, with activity concentrated largely in seniors housing and no IPOs completed. On the distribution side, 16 Canadian REITs raised payouts over the past year against one cut, compared with 20 increases and one decrease in the prior 12-month period, while the sector’s weighted average yield stood at 4.7 per cent at the end of August, 20 basis points tighter than a year earlier.
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