Canadian Real Estate 3/13/26
Canadian Real Estate has begun 2026 with a +2.6% total return (XRE a/o 3/13). US REITs are +3.8% and the CAD has depreciated by 0.1%.
Markets are hopeful that an extended closure of the Strait of Hormuz will be avoided, but I have not seen any theory how that will be achieved. If it remains closed then oil prices could pass $200/barrel and cause severe economic consequences. Oil prices are inelastic because most refined products are used in transportation where vehicles/planes/ships cannot use any other fuel - if supply drops then the price needs to rise a lot to reduce demand. Equity prices have not fallen nearly enough to reflect the impact of an oil supply and price shock if it happens. Hopefully diplomacy can avert a worst-case outcome. The greatest risks in the Canadian real estate sector are for companies with weaker balance sheets and those where investors are expecting a beneficial corporate action like major asset sales or M&A. Deals will slow sharply until the macro uncertainty is resolved.
Topics
Sector Overview
Valuation Comparison ($)
Quick Takes ($) DIR.UN, DRM, KMP.UN, MRD, MRG.UN, RFA
Sector Overview
The yield premium of cap rates over 10-year bond yields is near the middle of its historical range. Rates have risen about 30bp in the 3 weeks since my last sector commentary and credit spreads for REIT debentures have widened by 10-20bp. Not great …
Most of the Canadian yield curve has moved higher due to higher expectations for growth and inflation. That environment would benefit more economically sensitive properties such as Industrial and Retail. Higher rates are a challenge for low yielding Multifamily assets.
Insiders at 26 of 38 REIT/REOCs were buyers since 10/1/25 and 4 had net insider sales. REIT/REOCs have repurchased $325mm of equity since 10/1 (reported to 3/13) with the largest buybacks at CAPREIT, Boardwalk, Dream Industrial, Riocan, and Dream Unlimited.