2024 RealREIT Conference: Optimism, opportunities, and ongoing challenges
2024 RealREIT Conference: Optimism, opportunities, and ongoing challenges
The 2024 RealREIT Conference brought a renewed sense of optimism to the Canadian REIT market. Industry experts highlighted key trends shaping the landscape, including a rebound in retail, continued strength in multi-residential and senior housing, and ongoing challenges in the office sector. The conference also addressed the housing crisis, emphasizing the need for government intervention and highlighting opportunities for cash-rich investors. The overarching theme was clear –– navigating market challenges require innovation, strategic thinking, and a focus on long-term stability in Canadian real estate.
The 2024 RealREIT Conference brought together real estate industry leaders to tackle the challenges and trends shaping the real estate investment trust (REIT) market. This event wasn’t just about presentations, it was about diving into the conversations that matter most to not only industry experts –– but Canadians feeling the effect. From market outlooks to networking with top executives and experts, it was an opportunity to gain insights and make connections that drive real impact.
The conference highlighted a cautiously optimistic outlook after a challenging year in 2023, and the tone is shifting. REITs are beginning to show strengthening signs of recovery.
Market brightens amid shifting interest rates
Historically, the REIT market’s performance has moved in tandem with interest rates. When rates rise, REITs tend to struggle –– when rates fall, REITs see a boost. While rates have been a concern, the recent decline has brought some relief to the market. Despite some recent economic headwinds, the long-term data reveals that REITs have performed well over the past decade. The improved market conditions are bringing back investors, indicating increased confidence with some
Sector performance: Who’s thriving and who is struggling
In 2024, some strong performing sectors are:
- Seniors housing and multi residential properties: Leading the charge, these sectors are thriving due to Canada’s expanding population ongoing demand for housing and care facilities. This continued need makes these sectors a promising long-term investment.
- Retail properties: This sector has made a significant comeback. During the pandemic, many declared bricks-and-mortar retail dead. However, the narrative has changed. A key factor to the resurgence attributed in the strategic integration of retail spaces within residential buildings, creating a more connected and convenient lifestyle for tenants.
- Industrial: The sector remains strong, although the surge it experienced during the pandemic has slowed somewhat. Corporations such as Amazon continue to see a drive for demand, despite the increase for more services such as experiences heightening, rather than material products, along with environmental concerns.
Where the weakness lies:
- Office properties: Remain one of the spaces hardest hit and continue to lag. The hybrid work model is still very prevalent, reducing the demand for office space. While converting offices to multi-residential or retail has been discussed, it remains a complex and costly endeavor that has yet to take off in a meaningful way.
Future trends and outlooks
Addressing the housing crisis
While there is optimism in some sectors, Canada’s housing crisis remains a major and growing concern. With soaring construction costs, regulatory delays, and influx of newcomers –– the market is feeling immense pressure. The gap in affordability is widening, especially for younger Canadians who find themselves renting because homeownership is out of reach.
The conference underscored that construction businesses continue to face delayed project timelines. With minimum pre-sale targets not being met, coupled with rising material costs make new development increasingly difficult. Calls for government intervention were loud and clear, with consensus being that without policy support, the housing crisis will only worsen.
Foreign investment: Canada’s attractiveness remains high
Foreign investors continue to show interest in Canadian REIT’s, primarily due to the sector’s strong investment-grade debt. Anywhere from 63 to 84 percent of REITs have high-quality debt, which is a significant draw for outside investors from a risk perspective. Canada’s stable banking system and sound economic policies bolster the appeal, making specifically Canadian REITs a preferred option for international investors seeking diversification.
Opportunities for cash buyers
Market conditions have created a favourable environment for cash buyers. High interest rates have made financing difficult, but those who have liquidity can capitalize on the current market dynamics. The advice for these investors is to keep a close watch on developments over the next six to 12 months to spot and capitalize on buying opportunities
Looking ahead stability and creativity will lead the way
Despite the challenges, the outlook for Canadian real estate remains a relatively stable investment with the country's growing population ensuring the demand in sectors like multi residential and senior housing will continue.
There is also a sense that creativity will be crucial for addressing ongoing challenges especially in housing. Whether it’s rethinking office spaces, developing new mixed-use properties, or finding ways to address housing affordability, the market is ripe for innovation solutions.
Final thoughts
The key takeaway from the 2024 RealREIT Conference is that while challenges persist –– particularly in office spaces and housing affordability –– there are promising signs of market recovery. For investors, the path forward involves staying adaptable, informed, and ready to act on new opportunities as they emerge. Stability in real estate, coupled with the readiness to innovate will define the success in the evolving Canadian REIT landscape.
Jo-Ann Lempert FCPA, ICD.D, CPA auditor
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