What Are REITs?
Real Estate Investment Trusts (REITs) are publicly traded companies that own, operate, or finance income-producing real estate. Canadian REITs are listed on the Toronto Stock Exchange (TSX) and offer investors a way to gain exposure to real estate assets — office buildings, shopping centres, industrial facilities, apartment buildings, and more — without the complexity of direct property ownership. REITs are required to distribute the majority of their taxable income to shareholders, making them attractive for income-seeking investors.
Types of Canadian REITs
Canadian REITs span multiple property sectors, each with different risk and return characteristics. Residential REITs own multi-family apartment buildings and benefit from strong rental demand and low vacancy rates. Industrial REITs own warehouses and logistics facilities and have benefited enormously from the growth of e-commerce. Retail REITs own shopping centres and strip malls, a sector that has been challenged by the shift to online shopping. Office REITs own commercial office buildings, a sector facing structural challenges from hybrid work patterns.
Key Metrics for Evaluating REITs
When evaluating Canadian REITs, the most important metrics include Funds From Operations (FFO) and Adjusted Funds From Operations (AFFO), which are the real estate equivalents of earnings per share and represent the cash generated by the portfolio. The payout ratio — distributions as a percentage of AFFO — indicates the sustainability of the dividend. Occupancy rates and lease expiry schedules provide insight into the stability of rental income. Debt levels and the REIT’s interest coverage ratio are important risk indicators.
The Investment Case in 2026
Canadian REITs experienced significant valuation compression during the 2022-2023 rate-hiking cycle, as rising interest rates both increased borrowing costs for REITs and made their yield less competitive with fixed income alternatives. As rates have moderated in 2025 and 2026, REIT valuations have partially recovered. Industrial and residential REITs with strong balance sheets and quality assets continue to be favoured by analysts, while office and certain retail REITs face more structural uncertainty.
Conclusion
Canadian REITs offer a liquid, diversified, and relatively accessible way to invest in real estate. They are suitable for investors who want real estate exposure without the management burden of direct ownership. As with any investment, thorough research, diversification across REIT sectors, and attention to valuation are essential for successful REIT investing.
