Canadian Real Estate has delivered a +3.4% ytd total return (XRE a/o 10/30). US REITs are +7.8%, and the CAD is -1.8% vs USD. US REITs have benefitted from Lodging, Healthcare, and Data Centers, sectors that are underrepresented in in Canada. This report updates valuations and has brief comments on companies with recent news.
Bursting of the AI mania and a US move towards fiscal consolidation (more likely under divided government) could lead to lower US interest rates, a weaker USD, and a rebound in real estate values and transaction volumes.
Topics:
Sector Overview
Valuation Comparison ($)
Quick Takes ($) Allied Properties, Dream Industrial, Dream Office, Go Residential, H&R, Morguard Residential, Morguard REIT, Primaris
Sector Overview
The yield premium of real estate cap rates over 10-year bond yields was pressured by the sharp 3Q26 rise in bond yields. Some relief came in late October.
Canadian yields are still at least 110bp lower than the US at every maturity. For real estate investors, Canadian property offers a positive return over financing cost, but US property buyers may get little, or even negative return on leverage.
Insiders at 23 of 34 REIT/REOCs were buyers since 1/1/26 and 7 had net insider sales. REIT/REOCs have repurchased $592mm of equity since 1/1 (reported to 10/28) with the largest buybacks at Boardwalk (7.8% of market cap), Clarke (4.0%), Killam (3.9%), and Dream Industrial (2.6% of market cap).