Canadian Real Estate 2/20/26

Valuation Update and Quick Takes

Canadian Real Estate has begun 2026 with a +5.3% total return (XRE a/o 2/20). US REITs are +7.1% and the CAD has appreciated by 0.3%.

Topics

• Sector Overview

• Valuation Comparison ($)

• Quick Takes ($) AP.UN, MPCT.UN, DIR.UN, D.UN, DRM, HR.UN, MI.UN, MRC, MRT.UN, MRG.UN, RFA

Sector Overview

• The yield premium of cap rates over 10-year bond yields is near the middle of its historical range. Lower benchmark rates, lower credit spreads, and solid property fundamentals should lead to lower cap rates in 2026 and an upturn in NAVs.

  

• Canadian interest rates have fallen at all maturities over the past year (CORRA -75bp, GOC 2-year -28bp GOC 5yr -6bp). A steep yield curve signals higher future growth expectations that would be more beneficial to economically sensitive Industrial and Retail Assets. Yields on 2-3 year maturities for high quality REIT issuers have dropped under 3.25%.

  

• Insiders at 26 of 38 REIT/REOCs were buyers since 10/1/25 and 3 had net insider sales. REIT/REOCs have repurchased $278mm of equity since 10/1 (reported to 2/20) with the largest buybacks at CAPREIT, Riocan, Boardwalk, Dream Industrial, and Dream Unlimited.