In the world of real estate investment trusts (REITs), investors who come looking for passive income can find said income in many forms. Whether we’re talking residential, commercial, industrial, or other real estate asset classes (often times rolled up under larger banners), there’s a lot to like about the Canadian market in terms of its REIT offerings.
Indeed, the housing sector is Canada’s largest. That may be surprising to some, considering how vast the country’s resource base is.
But the reality is that with a foreign investor-driven real estate focused economy comes opportunities, particularly if this flood of capital continues in the decades to come.
Here’s my top pick for investors looking to put their next $10,000 to work in a Canadian REIT
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Industrial real estate is where I’d put my money to work
Canadian residential and commercial real estate has performed decently well in recent years, driven by strong immigration trends and an overall economy that looks okay on the surface.
However, the relative lack of industrial real estate near city centers (which may be surprising to some outside of Canada, given how vast the country is and how much open land their is) has led to a situation where investors putting capital to work in industrial real estate have outperformed most other sectors, at least in recent years.
Now, AI data centers and other higher-growth parts of the real estate market generally roll up into industrial real estate as well. Thus, this is a space that’s not only attractive from a fundamental long-term investor’s perspective, it happens to be trendy right now.
Which industrial REIT to buy?
In my view, Dream Industrial REIT (TSX:DIR.UN) continues to be my top pick in the industrial real estate sector for long-term investors.
This REIT provides a current dividend yield of 5.8%, with an impressive history of dividend growth over time. I’d expect such trends to continue, so long as demand for industrial real estate remains strong (which it appears to be).
And with cap rates continuing to decline in most major Canadian markets, investors buying a diversified basket of industrial real estate may simply be better off. Simply put, it’s hard to know which market will be the one to invest in a decade or two down the road. Buying a company with real estate all over North America, like Dream Industrial REIT, is a much safer way to play this trend.
That’s my take, at least.
