The Canadian real estate market has been in a rough patch lately. Home sales dropped by 9.8% in February, the biggest decline since May 2022. The impact has been widespread, with about three-quarters of local markets feeling the pressure. Toronto and the surrounding areas have been hit especially hard, raising concerns about what comes next for the sector.
For real estate investment trusts (REITs), the situation hasn’t been any easier. These stocks, which provide exposure to rental properties, retail spaces, and other income-generating real estate, have been facing challenges. Higher interest rates, economic uncertainty, and shifting tenant demand have put pressure on valuations. Many investors are now wondering whether it’s time to cut losses or look for long-term opportunities. So, let’s look at some popular real estate stocks and where they land.
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CAPREIT
One of the largest players in the space, Canadian Apartment Properties REIT (TSX:CAR.UN) has a market capitalization of about $6.8 billion as of March 2025. CAPREIT owns a vast portfolio of rental properties across Canada and has historically been a go-to for investors seeking stable rental income. However, it hasn’t been immune to the broader market struggles.
In its latest earnings report, CAPREIT posted steady occupancy rates but flagged some concerns. Rising costs, a softer rental market in certain regions, and ongoing affordability issues have created uncertainty. The real estate stock is still generating income, but it remains to be seen how much growth it can achieve in the near term.
RioCan
Another major player, RioCan REIT, (TSX:REI.UN) specializes in retail and mixed-use properties. With a market cap of around $5.5 billion, it’s one of Canada’s largest real estate firms. The real estate stock has been working to transition beyond traditional shopping centres by adding residential units to its portfolio — a strategy aimed at offsetting challenges in the retail sector.
Despite these efforts, its latest earnings report showed a slight dip in rental income. Some tenants are struggling, and while RioCan has long-term leases in place, it’s clear the retail environment isn’t as strong as it once was.
SmartCentres
SmartCentres REIT (TSX:SRU.UN) is another real estate giant valued at about $4.4 billion. It has a strong presence in retail, particularly with Walmart-anchored shopping centres. This has provided some stability, but the real estate stock has also been pushing into residential and mixed-use developments to diversify its revenue streams.
The latest earnings report showed resilience in its core business. Yet, like other REITs, SmartCentres is facing headwinds from higher interest rates and shifting consumer behaviour.
Foolish takeaway
The biggest question for investors is whether this downturn presents a buying opportunity or a warning sign to stay away. Real estate stocks tend to be highly sensitive to interest rate changes, and with rates remaining elevated, borrowing costs have made it more expensive for REITs to expand and refinance debt. If the Bank of Canada continues rate cuts, REITs could get a much-needed boost. But until then, many will remain under pressure.
That said, some investors see long-term value. CAPREIT continues to collect steady rental income, RioCan’s mixed-use strategy could pay off over time, and SmartCentres’s diversification efforts may provide stability. For those willing to ride out the volatility, today’s lower prices could be an opportunity to lock in strong dividends.
For now, the real estate market remains uncertain, and not every real estate stock will recover at the same pace. Investors should be selective, looking for companies with strong balance sheets, reliable cash flow, and a clear strategy for weathering the current environment. While the market may look bleak today, those with patience could see brighter days ahead.
