Investors looking for an industrial real estate investment trust (REIT) might believe they want some hidden growth star or high-yielder. However, instead, investors should try to spot the quiet operators with the right mix of property quality, growth runway, and financial discipline.
The best industrial REITs don’t need flashy announcements or sky-high yields, but instead quietly compound value through steady rent growth, smart development, and disciplined capital use. So, let’s look at what investors should keep their eyes on and one industrial REIT that fits the bill.
What to watch
Great industrial REITs serve mission-critical tenants. These are companies that can’t easily move out without disrupting their logistics, production, or distribution networks. Long-term leases of five to 10 years with rent escalators tied to inflation, strong tenant bases from diverse industries, and evidence of renewals with 95% or higher occupancy are clear winning signs.
Furthermore, even in industrial real estate, it’s all about where the properties are. The best growth opportunities lie near major transport arteries or close to urban centres where last-mile delivery is critical. This allows for contribution to internal growth potential, with embedded value not yet reflected in financials. So, look at what the company has, but also where that REIT is headed in the future.
Growth takes capital, but too much debt kills flexibility. The best up-and-coming REITs finance expansion with a healthy balance of debt and equity. Plus, a REIT’s funds from operations (FFO) are the clearest gauge of its health. Hidden growth stars usually show steady FFO-per-unit growth of 5% to 10% annually, without overpaying distributions. A payout ratio under 80% means they’re retaining enough cash to reinvest or weather downturns. And of course, amidst all this, you want great value.
Consider DIR
Dream Industrial REIT (TSX:DIR.UN) could be a compelling hidden growth star in Canada’s industrial landscape. It’s quietly building one of the most valuable, modern, and globally diversified industrial portfolios in the country, capturing the demand for logistics, e-commerce, and manufacturing space that’s reshaping the economy. For long-term investors, it offers the mix of steady income, internal growth, and strategic expansion that can quietly compound wealth for years.
Dream Industrial owns, manages, and develops over 330 properties across Canada, the United States, and Europe, totalling roughly 71 million square feet of gross leasable area. That makes it one of the largest pure-play industrial REITs in Canada. What sets Dream apart is that it focuses on mission-critical assets in key transportation corridors. As a result, it consistently reports occupancy above 95% and a long history of near-full rent collection, even in weaker markets.
In Canada and Europe, vacancy rates for quality industrial properties are still under 3%, meaning space is scarce. That scarcity allows Dream to push through rent increases and capture higher margins when leases roll over. Its same-property net operating income (NOI) continues to rise, supported by these secular forces. Most recently, it saw net rental income rise to $91.7 million, with FFO up to $0.26 per unit. That’s a steady FFO of between 5% and 8% over the last few years.
Growth and income
Yet there’s more to come, with Dream expanding in Europe where industrial property values and rents have surged. This growth is supported by a conservative balance sheet and an interest coverage ratio exceeding three times. Therefore, there’s ample liquidity to fund ongoing development products.
DIR currently trades at just 13 times forward earnings and 0.78 times book value. That puts it well within value territory. Plus, analysts believe it could certainly be an overperformer within the next year.
The other bonus? It offers a solid dividend yield of 5.6% at writing, supported by a healthy 94% dividend payout ratio. That’s one of the better payouts amongst Canadian REITs, and with more room to grow, given the company’s future expansion efforts.
Bottom line
Dream Industrial REIT is the definition of a hidden growth star. It’s understated, cash-generating, and built for the long haul. It sits squarely in one of the world’s most in-demand property sectors, with a conservative balance sheet and a long runway for expansion. So, if you want growth, cash, and a bit of excitement, this dividend stock is for you.
