Canadian REIT leaders debate how to win back investors

Canadian real estate investment trusts (REITs) are losing ground as capital migrates toward other sectors, prompting industry leaders to assess how to reclaim investor interest. During the RealREIT conference in Toronto on September 16, a discussion led by Michael Brooks, CEO of the Real Property Association of Canada (REALPAC), explored where investment dollars are moving—and why real estate now struggles to compete for them.

Lora Gotcheva, an independent board member of SmartStop Self Storage and former managing director at CPP Investments, clarified that real estate and private investments serve distinct purposes. Each provides access to different markets, leverage options, and liquidity terms. However, pension funds and institutional investors increasingly favor energy and infrastructure over real estate, which has delivered weaker performance in recent years.

This shift aligns with broader trends, as real estate now competes directly with private equity, infrastructure, and private credit—sectors now delivering returns exceeding 10%.

Simon Holmes, managing partner at BGO and Canadian chief investment officer, described the past four years as the most difficult for commercial real estate since the early 1990s. Despite the challenges, he remains confident that undervaluation will eventually restore investor trust. A key obstacle, however, is that newer asset classes, such as data centers and self-storage, have gained popularity in the U.S. but remain limited in Canada. Holmes cautioned that many of these alternatives lack proven resilience, as they have not yet been tested through a full economic cycle.

Seniors housing emerges as resilient core asset

One sector bucking the trend is seniors housing, which has transitioned from an alternative investment to a core holding. Jonathan Boulakia, chief investment officer of Chartwell Retirement Residences, positioned it as essential, citing strong demographic demand and chronic supply shortages.

While seniors housing gains traction, retail REITs are showing signs of recovery. The MSCI/REALPAC Canadian Property Index reported that retail outperformed residential and industrial in the second quarter, a shift from just a few years ago. Primaris REIT, Canada’s only enclosed shopping center-focused trust, is leading this rebound. Its recent acquisitions have established it as the top performer in retail, with Julian Schonfeldt, the trust’s chief investment officer, noting its ability to act as the sole bidder in deals, securing assets at favorable terms.

Primaris announced a $200 million equity offering on September 14 to fund future expansion, with over $1 billion in potential acquisitions under negotiation. Schonfeldt emphasized that strong management can revitalize even struggling asset classes. Boulakia reinforced this point, stating that consistent shareholder returns, through disciplined growth and operational excellence, are what ultimately attract capital.

Liquidity crisis stalls Canadian REIT recovery efforts

Liquidity remains a significant obstacle. Many Canadian REITs suffer from low trading volumes, making it difficult for institutional investors to enter or exit positions without affecting stock prices. Brooks argued that increasing investor accessibility, through higher trading activity and more initial public offerings, could unlock new capital. Holmes expects a rebound in IPOs within the next five years as market sentiment improves.

Canadian REITs face an additional challenge: competition with global giants. Gotcheva noted that Welltower, a U.S.-based REIT, accounts for 8% of global benchmarks, while the entire Canadian market represents just 2%.

Pension funds now allocate more capital to energy and infrastructure, sectors that provide inflation protection and durable returns, qualities once associated with real estate. Gotcheva observed that while real estate historically delivered steady income and diversification, its underperformance has weakened its competitive position. The gap between real estate’s modest returns and the double-digit yields in private equity, infrastructure, and private credit has forced fund managers to reallocate capital accordingly.

Holmes warned that the rapid growth of alternative asset classes in the U.S., such as data centers, self-storage, and cellular towers, presents both opportunities and risks for Canadian investors. Though these sectors are expanding south of the border, they remain limited in Canada, where traditional property types still dominate. He cautioned that many alternatives lack the proven track record of established real estate classes, which have endured multiple market cycles.