- What Pros at the RealREIT 2024 conference pointed to encouraging signs that investors are returning to Canadian REITs
- Why Interest rate cuts, easing inflation and strong market fundamentals are all leads to increased capital inflows
- What next Stronger market activity is anticipated as economic headwinds recede
After a period punctuated by high interest rates and investor reluctance, there are signs that Canadian REITs are springing back to life, market pros said at this year’s RealREIT conference in Toronto.
Canadian REITs raised $1.1bn of capital in Q2 — a more than 50% increase over the same period a year earlier, according to S&P Global. The market value of the Canadian REIT market rose $6bn year over year to $75bn.
Including real estate operating companies, that figure rises to $84bn, which, according to RBC Capital Markets, is the highest it’s been since the investment “gold rush” of the pandemic years from 2021 to 2022, when the overall market value of Canadian REITs and REOCs was well north of $100bn.
The sharp rise in capital inflow after years of underinvestment suggests a growing optimism for REITs — historically the largest transactors of Canadian real estate — which have lost ground in recent quarters to private equity and foreign capital. But with successive interest rate cuts, that could be changing.
“We’re definitely getting an increase in the number of inbounds from multiple channels: investors, wholesalers and so on,” said Chris Couprie, a portfolio manager and research lead for CI Global Asset Management, which operates a global fund focused on REITs.
He said the increased interest suggests they will be more willing to invest in REITs.
“People have got to be asking questions and showing engagement in this space before they start committing dollars to it.”
Maria Benavente, portfolio manager for Toronto-based 1832 Asset Management, a division of Scotia Global Asset Management, said that even compared with a year ago, there is much more enthusiasm for domestic property investment. That comes as values are starting to recover following recent interest rate cuts and strong market fundamentals.
“From a valuation perspective, we really do think that Canada looks a little bit more attractive,” Benavente said.
Investors appear to be most enthusiastic about companies that own senior housing and multifamily properties. With a dearth of housing and an aging population, the investor opportunity is clear, said David Holden, managing director and co-head of Canadian real estate investment banking for RBC.
Holden noted that Chartwell, the country’s largest provider of retirement communities and other forms of living catering to seniors, has reported consistent growth since fallow periods caused by the pandemic and dips in occupancy.
“The pandemic caused a softening in 2020 that took some time to recover from,” he said, “but as one should expect, the buildings are filling up again as rents are growing.”
