Navigating the stock market in 2025 can feel like sailing through choppy waters, especially with the trade war casting shadows of uncertainty. The need for stable, reliable, and high-yield passive-income investments becomes paramount for Canadian investors looking to secure their retirement income. Real estate investment trusts (REITs) present a compelling, resilient option.
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Why buy REITs in 2025?
REITs pool capital from numerous investors and hire professionals to build and manage income-producing real estate portfolios that make regular income distributions (usually monthly) to investors. In Canada, where the real estate market has historically shown resilience, retail REITs can be a valuable addition to a diversified retirement portfolio.
However, not all REITs are created equal. Factors such as portfolio composition, tenant quality, and financial health can significantly influence their performance and ability to generate consistent passive income. Let’s zoom in on two of the major players in the Canadian retail REIT space — RioCan Real Estate Investment Trust (TSX: REI.UN) and Choice Properties Real Estate Investment Trust (TSX: CHP.UN) — to explore which might be the “better” REIT for your specific needs, considering factors like monthly passive-income generation, yield, and long-term growth prospects.
RioCan REIT
RioCan REIT is one of Canada’s largest real estate owners, primarily focused on retail-focused but increasingly mixed-use properties. The REIT’s property portfolio comprises 178 properties with 32 million square feet of gross leasable area (GLA) located in Canada, with some presence in the United States. It boasts highly sought-after necessity-based shopping centres with a diversified tenant base and a strong 98% occupancy rate.
For investors seeking passive income, RioCan REIT offers a monthly distribution that currently yields 6.7% annually. This monthly income can be particularly attractive in retirement planning as a steady cash flow to cover living expenses.
However, consider this potential risk factor: RioCan’s exposure to Hudson Bay Company (HBC).
RioCan has ties to Hudson Bay through joint ventures and loans, and the department store operator is undergoing significant restructuring, planning to liquidate about 80 stores by June 30, 2025. The store closures could lead to increased vacancies in up to 13 of RioCan’s properties, with potential rent losses. RioCan is a minority investor in a joint venture with HBC, and direct income losses for RioCan may be relatively low. The joint venture comprised 3.2% of RioCan’s net operating income and 2.5% of its funds from operations (FFO) in 2024. However, increased vacancies will require management’s time and effort to address.
That said, RioCan guaranteed some of Hudson Bay’s debt (about $88.7 million), which could negatively impact its balance sheet liquidity in the short term.
Despite these challenges, RioCan’s payout remains intact. In 2024, RioCan had one of the lowest payout ratios among its peers, distributing approximately 60% of its FFO. The distribution is well covered by recurring cash flow in 2025. RioCan demonstrated confidence in its financial prospects by increasing its monthly distribution by 4.3% in February 2025.
Choice Properties REIT
Choice Properties REIT is a major retail space operator with a vast portfolio of over 700 properties comprising 67.2 million square feet of GLA. It’s one of Canada’s largest urban landowners, with a real estate portfolio valued at over $17 billion.
Choice Properties owns a more diversified portfolio comprised of 66% necessity-based retail, 31% industrial space, and under 3% exposure to mixed-use assets. A key strength of Choice Properties is its close association with Loblaw, a major Canadian retailer which accounts for about 57% of Choice Properties’s annual gross rental income. While this concentration does create some dependence risks, Loblaw is an investment-grade tenant currently performing very well.
Investors seeking passive income may get a 5.4% yield on Choice Properties REIT. While this yield is lower than RioCan’s, Choice Properties presents a different risk and growth profile. The REIT paid out 73.6% of its FFO as distributions last year. It has increased payouts for three consecutive years.
Most noteworthy, Choice Properties REIT exhibits strong operational metrics. Occupancy rates were at 97.6% heading into 2025. It boasts long lease terms with an average remaining lease term of 6.1 years. Choice Properties REIT’s average in-place base rent of $9.76 was significantly below the Canadian market average rent per square foot of $15.51, showing a 58.9% upside on release.
Higher rental rates may support distribution increases in the future.
