Investing in Canadian real estate investment trusts (REITs) can be a great way of gaining real estate exposure in your investment portfolio without the hassle of a rental property. Shares of REITs trade on exchanges like stocks and often payout monthly income. Investing in REITs can be a great way of implementing a dividend growth investing strategy.

However, buying and holding enough REITs to stay diversified can be difficult. An alternative here is an exchange-traded fund (ETF) that holds a portfolio of REITs. Investing in a REIT ETF can be a hands-off way of picking some of the top REITs on the market.

If you’re interested in investing in Canadian REIT ETFs, we’ll break down everything you need to know.

What is a REIT ETF?

A real estate investment trust (REIT) ETF is an open-ended fund that holds a “basket” of different REITs. When investors buy shares of the REIT ETF, they receive a proportional “slice” of this basket and exposure to both the returns and risk of all the underlying REITs it holds. But crucially, because REIT ETFs hold a diversified basket of REITs, they lower risks and improve your overall risk-return profile.

Unlike REIT mutual funds, REIT ETFs trade throughout the day on stock exchanges, and can be bought and sold intra-day on most brokerage apps. They’re considered an eligible investment that can be held in most accounts.

When it comes to their strategy, Canadian REIT ETFs can be passively or actively managed. Passive REIT ETFs track an externally provided index of Canadian REITs and try to replicate the index’s holdings and performance as closely as possible. Their goal is to match the indexes performance, not beat it.

On the other hand, active REIT ETFs create their own strategies to pick and choose Canadian REITs in an attempt to outperform a specific benchmark. They’re not constrained by the rules of an external index. These ETFs tend to be costlier than their passively managed counterparts.

Unlike individual REITs, REIT ETFs charge a management expense ratio (MER), expressed as an annual percentage fee. The MER pays for the ETF manager’s trading, operational, administrative, and marketing costs. For example, a Canadian REIT ETF with a MER of 0.61% would cost around $61 annually in fees for a $10,000 investment.

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Top REIT ETFs in Canada

The following Canadian REIT ETFs provide exposure to REITs using a variety of different strategies.

iShares S&P/TSX Capped REIT Index ETF

XRE (TSX:XRE) remains one of the most popular REIT ETFs in Canada, with roughly $1.3 billion in assets under management. The fund tracks the S&P/TSX Capped REIT Index, giving investors broad exposure to Canada’s largest publicly traded real estate investment trusts. Today, the ETF holds 16 REITs spanning retail, residential, industrial, office, and healthcare properties. It is still fairly top-heavy, with significant weight in major names such as Canadian Apartment Properties REIT and Riocan REIT.

While XRE provides convenient diversification across the sector, its long-term performance has lagged some standout individual REITs such as Dream Industrial REIT. Still, for investors comfortable adding real estate exposure, XRE offers monthly income with a 12-month trailing yield of 5.13%. The MER sits at 0.60%, and because REIT distributions are not eligible dividends, the ETF is generally better held in registered accounts like a TFSA or RRIF for better tax efficiency.

Dream Industrial REIT

Dream Industrial REIT (TSX:DIR.UN) is a leading player in Canada’s industrial real estate sector, supported by a high-quality portfolio of warehouse and distribution assets positioned near major population centres. With more than 552 properties across Canada, Europe, and the U.S., the REIT benefits from strong demand fundamentals, exceptionally low vacancy rates, and a diversified base of over 1,400 tenants. Its focus on logistics-oriented facilities and access to scarce, strategically located land has helped fuel strong NOI growth and maintain occupancy above 95%.

The REIT continues to expand through development projects and targeted acquisitions, particularly in European markets where rental trends remain favourable. This growth, combined with a well-structured balance sheet and long-standing debt at attractive rates, supports a stable and rising income stream. With a yield near 5.7% and monthly distributions, Dream Industrial stands out as a compelling option for investors seeking reliable passive income and long-term sector leadership.

BMO Equal Weight REITs Index ETF

BMO Equal Weight REITs Index ETF (TSX:ZRE) tracks the Solactive Equal Weight Canada REIT Index, giving investors exposure to about 20–24 Canadian REITs with no single trust dominating the portfolio. Each holding typically sits around 4.7% to 5.1%, allowing smaller and faster-growing REITs to carry the same weight as the largest names. The fund is diversified across retail, multi-family residential, industrial, diversified, healthcare, and office REITs, with retail and residential making up the largest portions.

The ETF offers a monthly distribution with a yield around 4.8–4.85% and carries a 0.61% MER to support its ongoing rebalancing. With roughly $590 million in assets and 10-year annualized returns of about 7%, ZRE provides steady, sector-wide exposure for income-focused investors. Because REIT payouts are taxed as regular income, it’s generally best held inside a TFSA for maximum tax efficiency.

CI Canadian REIT ETF

Investors willing to pay a higher MER for active management may find CI Canadian REIT ETF (TSX:RIT) appealing. Unlike XRE or ZRE, this ETF doesn’t follow an index. Instead, its managers hand-pick REITs they believe will outperform and adjust the portfolio as market conditions change. It also has the flexibility to hold a small allocation of U.S. REITs, offering additional diversification beyond Canada.

Today, RIT provides broad exposure to Canada’s leading real estate trusts, yet its top 15 holdings notably exclude SRU.UN and AP.UN. The ETF currently yields about 5.3% and has delivered a strong 8.5% annualized total return over the past 20 years. For investors seeking a balanced, lower-maintenance way to invest in real estate without selecting individual REITs, RIT remains a compelling option.

Vanguard FTSE Canadian Capped REIT Index ETF

Vanguard FTSE Canadian Capped REIT Index ETF (TSX:VRE) passively tracks the FTSE Canada All Cap Real Estate Capped 25%, which currently has 19 underlying holdings. Like XRE, the underlying holdings in VRE are weighted according to their market cap with a 25% limit on any single holding. However, VRE differs in that it also includes a few non-REITs. These include real estate service companies like First Service Corp (TSX:FSV) and real estate operating and development companies like Colliers International Group (TSX:CIGI). VRE is the cheapest ETF on this list.

Pros of investing in Canadian REIT ETFs

Investing in REIT ETFs can have the following advantages:

• Exposure to real estate prices: Canadian REIT ETFs allow investors to invest in real estate without the money needed for a home down payment or time needed to manage a rental property.
• Diversification: A Canadian REIT ETF holds a portfolio of REITs from all industries and thus provides more diversification than investing in single REITs.
• Capital efficiency: Buying shares of a Canadian REIT ETF requires less money than investing individually in shares of different REITs.
• Income: REITs tend to pay a higher yield compared to dividend stocks and bonds and do so on a monthly basis, making them ideal for investors seeking income.

Cons of investing in Canadian REIT ETFs

Canadian REIT ETFs can have the following disadvantages:

• Higher fees: Canadian REIT ETFs often charge a significantly higher MER than regular equity index ETFs do.
• Concentration: Market-cap weighted REIT ETFs can be heavily concentrated in only a few REITs, which makes them top-heavy and susceptible to the returns of only a few REITs.
• Interest rate vulnerability: Higher rates are usually linked to lower property values and higher borrowing costs for real estate buyers. Higher rates also make the yields on bonds more attractive, which combined with their lower risk can make investors sell REITs to buy bonds.¹

Are Canadian REIT ETFs right for you?

The answer to this question depends on your time horizon, investment objectives, and risk tolerance. In general, an allocation to Canadian REIT ETFs is best suited for either:

1. Advanced, long-term investors seeking an alternative to add to a portfolio of stocks and bonds.
2. Income-oriented investors seeking higher yields and monthly payouts in a tax-advantaged account to augment dividend stocks and bonds.

Keep in mind that REIT RTFs have volatility similar to stocks, called market risk, but also have greater sensitivity to other macroeconomic variables like falling real estate prices. As seen during the March 2020 COVID-19 crash, REIT ETFs can experience sharp losses. Keep in mind that if you own property, you already have exposure to real estate and thus may not want the additional exposure from a REIT ETF.