{"id":49589,"date":"2025-11-24T10:20:37","date_gmt":"2025-11-24T10:20:37","guid":{"rendered":"https:\/\/equiton.ca\/?p=49589"},"modified":"2025-12-17T07:51:33","modified_gmt":"2025-12-17T07:51:33","slug":"private-canadian-rentals","status":"publish","type":"post","link":"https:\/\/equiton.ca\/fr\/blog\/viewpoint-market-commentary\/private-canadian-rentals\/","title":{"rendered":"Q1 2025 Market Commentary and Outlook \u2013 Private Canadian Rentals a Bright Spot Amid Volatility"},"content":{"rendered":"
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Q1 2025 Market Commentary and Outlook \u2013 Private Canadian Rentals a Bright Spot Amid Volatility<\/h2>\t\t\t\t<\/div>\n\t\t\t\t<\/div>\n\t\t\t\t
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Published On: May 27, 2025 Categories: Viewpoint Market Commentary<\/a><\/p>\t\t\t\t\t\t\t\t<\/div>\n\t\t\t\t<\/div>\n\t\t\t\t<\/div>\n\t\t\t\t\t<\/div>\n\t\t\t\t<\/div>\n\t\t

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Q1 2025 Market Overview<\/h2>\t\t\t\t<\/div>\n\t\t\t\t<\/div>\n\t\t\t\t
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  • Uncertainty surrounding the scope and impact of evolving U.S. trade policy led to one of the most volatile quarters in public equities market history, drawing comparisons to the COVID-19 pandemic and the 2008-2009 Financial Crisis. Nonetheless, Canada\u2019s economy showed resilience in Q1\u201925<\/span><\/a> despite sector-specific slowdowns. The multi-residential real estate sector remained a bright spot, and private Canadian real estate assets continued to provide stability within diversified portfolios.<\/li>\n<\/ul>\t\t\t\t\t\t\t\t<\/div>\n\t\t\t\t<\/div>\n\t\t\t\t
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  • Momentum toward a widely expected rebound in Canadian real estate, driven by lower interest rates, appeared to slow amid near-term uncertainty. The Bank of Canada (BoC) lowered its policy interest rate by 25 basis points<\/span><\/a> in March despite a modest uptick in February inflation, <\/span><\/a>citing heightened trade tensions. Rate reductions in recent quarters have eased conditions for debt financing and have begun to encourage renewed real estate activity.<\/li>\n<\/ul>\t\t\t\t\t\t\t\t<\/div>\n\t\t\t\t<\/div>\n\t\t\t\t
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  • More renters signalled plans to stay in the rental market last quarter. The BoC\u2019s Q1\u201925 consumer survey<\/span><\/a> found the share of Canadian renters who expect to transition to homeownership this year fell sharply to 16.1%, 9.9% lower compared to the previous quarter.<\/li>\n<\/ul>\t\t\t\t\t\t\t\t<\/div>\n\t\t\t\t<\/div>\n\t\t\t\t
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  • Housing starts ended the quarter down 12.5% Y\/Y<\/span><\/a> in centres with populations of 10,000 or more, compounding pressure on Canadian markets already facing historic undersupply. Double-digit declines in planned construction in Toronto and Vancouver, driven by decreases in multi-unit starts, have begun to shape an increasingly severe shortfall in new apartment-style housing in high-demand urban centres.<\/li>\n<\/ul>\t\t\t\t\t\t\t\t<\/div>\n\t\t\t\t<\/div>\n\t\t\t\t
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  • While unemployment edged up to 6.7% in March<\/span><\/a> and immigration targets were revised downward, purpose-built rentals continue to benefit from their affordability relative to ownership and their appeal in uncertain job markets.<\/li>\n<\/ul>\t\t\t\t\t\t\t\t<\/div>\n\t\t\t\t<\/div>\n\t\t\t\t
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  • Although average asking rents dipped 2.8% Y\/Y<\/span><\/a> in March, this reflects normalization after years of rapid growth. Purpose-built rental rates remain resilient, having increased 35.5% since March 2020, compared to just 0.6% growth for condo rents over the same period. This long-term strength reinforces the value of institutional-quality, professionally managed rental housing.<\/li>\n<\/ul>\t\t\t\t\t\t\t\t<\/div>\n\t\t\t\t<\/div>\n\t\t\t\t
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  • Party leaders in Canada\u2019s federal election pledged supports for the housing market, suggesting a sustained focus on the issue after election day. Several policy proposals would encourage new home development and purchases, including GST exemptions for new-home buyers, gearing public lands to affordable housing, and providing financing to eligible homebuilders.<\/li>\n<\/ul>\t\t\t\t\t\t\t\t<\/div>\n\t\t\t\t<\/div>\n\t\t\t\t
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    Portfolio Update<\/h2>\t\t\t\t<\/div>\n\t\t\t\t<\/div>\n\t\t\t\t
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    Regional market diversification drove steady growth<\/h2>\t\t\t\t<\/div>\n\t\t\t\t<\/div>\n\t\t\t\t
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    \n\t\t\t\t\t\t\t\t\tAmid a tumultuous quarter in the public markets, the Equiton Residential Income Fund Trust (the Trust) continued to unlock value through opportunistic acquisitions made in 2024.\t\t\t\t\t\t\t\t<\/div>\n\t\t\t\t<\/div>\n\t\t\t\t
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    \n\t\t\t\t\t\t\t\t\tPurchased in Q4\u201924 at an attractive cap rate, the Trust\u2019s most recent acquisition \u2014 a newly built, 277-unit rental complex in Edmonton<\/span><\/a> \u2014 included 112 vacant units. Supported by an active marketing campaign highlighting the property\u2019s modern amenities, attractive location outside the city core, and spacious suites, occupancy rates exceeded pro forma. This early success validates the property\u2019s potential for future performance.\t\t\t\t\t\t\t\t<\/div>\n\t\t\t\t<\/div>\n\t\t\t\t
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    \n\t\t\t\t\t\t\t\t\tMeanwhile, the Trust continues to unlock value in the portfolio of four properties<\/span><\/a> acquired in Welland, Niagara Region, in Q2\u201924. Leasing efforts benefited from growing interest among downsizers and young families, as well as property enhancements made through the Trust\u2019s capital investment program which contributed to rental growth of approximately 40% on natural turnover. As at Q1\u201925, the properties\u2019 gap to market remains at 63%, signalling strong potential for future growth.\t\t\t\t\t\t\t\t<\/div>\n\t\t\t\t<\/div>\n\t\t\t\t
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    \n\t\t\t\t\t\t\t\t\tThis value growth underscores the strength of the Trust\u2019s diversified investment across both geography and risk strategy. The Trust\u2019s 14% portfolio unit allocation to Alberta continues to play a key role, offering a favourable operating environment with market-driven rents, strong population and employment fundamentals, and resilience through organic turnover. Expanding the portfolio\u2019s footprint in Alberta allows the Trust to gain further operational economies of scale, and Management continues to monitor the region for future acquisition opportunities.\t\t\t\t\t\t\t\t<\/div>\n\t\t\t\t<\/div>\n\t\t\t\t
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    \n\t\t\t\t\t\t\t\t\tOngoing urbanization trends in Ontario continue to support the Trust\u2019s presence in high-demand markets such as Toronto\u2019s urban core, key secondary markets across the GTHA, and Ottawa, where rental housing remains critically undersupplied.\t\t\t\t\t\t\t\t<\/div>\n\t\t\t\t<\/div>\n\t\t\t\t
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    Active rental development progressing<\/h2>\t\t\t\t<\/div>\n\t\t\t\t<\/div>\n\t\t\t\t
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    \n\t\t\t\t\t\t\t\t\tLease-up for Tower 1 of the Trust\u2019s ongoing rental development project in Ottawa, Maison Riverain, progressed well in Q1\u201925, with the first Residents welcomed home in early Q2\u201925. Active marketing efforts and the opening of an on-site leasing and operations office played a crucial role in generating interest among new Residents, reinforcing the Trust\u2019s in-house property management team as a key contributor to early success. Progress on Tower 2 continues as planned.\t\t\t\t\t\t\t\t<\/div>\n\t\t\t\t<\/div>\n\t\t\t\t
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    Sustainability initiatives<\/p>\t\t\t\t\t\t\t\t<\/div>\n\t\t\t\t<\/div>\n\t\t\t\t

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    \n\t\t\t\t\t\t\t\t\tThe Trust\u2019s company-wide focus on environmental, social, and governance (ESG) principles remains embedded in its site enhancement initiatives, customer service, and approach to transparency and financial oversight. Water retrofit projects continued across the portfolio, with upgrades completed at the Welland complex and additional efforts underway at other properties. The Trust is also beginning to implement its waste management strategy portfolio-wide, working with third-party consultants to right-size waste collection and enhance operational efficiency.\t\t\t\t\t\t\t\t<\/div>\n\t\t\t\t<\/div>\n\t\t\t\t
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    \n\t\t\t\t\t\t\t\t\tExpanding industry knowledge through key insights, the Trust\u2019s partnership with Concordia University\u2019s John Molson School of Business launched its second AI-driven research initiative, highlighting the resilience of Canadian real estate as climate events increasingly influence regional market dynamics.\t\t\t\t\t\t\t\t<\/div>\n\t\t\t\t<\/div>\n\t\t\t\t
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    Fund Performance & Strategic Positioning<\/p>\t\t\t\t\t\t\t\t<\/div>\n\t\t\t\t<\/div>\n\t\t\t\t

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    \n\t\t\t\t\t\t\t\t\tThe Trust\u2019s disciplined financial management and conservative leverage strategies continue to support healthy deal flow and refinancing flexibility. Management is actively converting non-CMHC mortgages to CMHC-insured financing, which now accounts for 97% of the mortgage portfolio. With a small percentage of the portfolio\u2019s debt coming due over the next five years \u2014 providing cash flow stability \u2014 and a healthy loan-to-value ratio of 51.8%, the Trust remains well positioned to capture refinancing opportunities and drive long-term distribution growth.\t\t\t\t\t\t\t\t<\/div>\n\t\t\t\t<\/div>\n\t\t\t\t
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    \n\t\t\t\t\t\t\t\t\tThe average portfolio cap rate held steady at 4.48% over the first quarter of 2025, consistent with year-end 2024 levels and representing a 20-basis-point increase compared to Q1\u201924. Same store quarterly operating revenues and net operating income (NOI) increased by 4.4% and 0.2% Y\/Y, respectively, offsetting valuation headwinds through operational strength. As well, Management achieved a ~$42k decrease (-9.6%) Y\/Y in same store water expenses through an ongoing sub-metering program, active monitoring and energy capex plan.\t\t\t\t\t\t\t\t<\/div>\n\t\t\t\t<\/div>\n\t\t\t\t
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    \n\t\t\t\t\t\t\t\t\tOccupancy within the property portfolio continued to outperform the national average, with portfolio occupancy at 98.1% against the national average of 96.0%. Natural turnover of 153 units during the quarter enabled 12.9% rent growth, while the portfolio\u2019s gap to market remained healthy at 28.7%, narrowing slightly from 30.9% in Q4\u201924. This stable gap underscores the Trust\u2019s ability to unlock organic growth and deliver stable performance, even amid ongoing public market volatility. With 2024 marking the Trust\u2019s most active year of acquisitions to date, early signs of value creation are already visible, supporting long-term investor outcomes.\t\t\t\t\t\t\t\t<\/div>\n\t\t\t\t<\/div>\n\t\t\t\t
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    Outlook and Portfolio Strategy<\/p>\t\t\t\t\t\t\t\t<\/div>\n\t\t\t\t<\/div>\n\t\t\t\t

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    Further rate cuts expected<\/p>\t\t\t\t\t\t\t\t<\/div>\n\t\t\t\t<\/div>\n\t\t\t\t

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    Further interest rate cuts this year cannot be ruled out as the BoC adjusts its policy stance in response to ongoing uncertainty surrounding tariffs. If businesses continue to slow hiring and investment, as they did last quarter, rising unemployment could force the BoC into a difficult choice: lower interest rates to support growth or raise them to contain inflation.<\/p>\t\t\t\t\t\t\t\t<\/div>\n\t\t\t\t<\/div>\n\t\t\t\t

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    \n\t\t\t\t\t\t\t\t\tCanadian equity and real estate markets, broadly, appeared less responsive to the typically stimulative effect of falling interest rates. In Q1\u201925, heightened equity market volatility reinforced the appeal of the private multifamily sector, which continues to demonstrate lasting fundamentals and is increasingly viewed as a reliable refuge.\t\t\t\t\t\t\t\t<\/div>\n\t\t\t\t<\/div>\n\t\t\t\t
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    \n\t\t\t\t\t\t\t\t\tRental markets demonstrate strong fundamentals\t\t\t\t\t\t\t\t<\/div>\n\t\t\t\t<\/div>\n\t\t\t\t
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    \n\t\t\t\t\t\t\t\t\tUrbanization remains a parallel driver to immigration, continuing to support rental growth in major metros like Toronto. While new immigration caps have had near-term impacts on rental demand \u2014 particularly in cities where newcomers drive much of the market \u2014 overall immigration-led population growth remains historically high. At the same time, internal migration from rural to urban areas continues, compounding demand pressures.\t\t\t\t\t\t\t\t<\/div>\n\t\t\t\t<\/div>\n\t\t\t\t
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    \n\t\t\t\t\t\t\t\t\tPurpose-built rental completions in the GTHA, one of Canada\u2019s most in-demand rental markets, are expected to reach a multi-decade high with 8.8k deliveries slated for 2025. Nonetheless, the Federation of Rental-housing Providers of Ontario projects that, at the current pace of construction, the provincial rental gap will exceed 207k units in the next 10 years, largely driven by immigration.\t\t\t\t\t\t\t\t<\/div>\n\t\t\t\t<\/div>\n\t\t\t\t
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    \n\t\t\t\t\t\t\t\t\tBy contrast, new condominium apartment starts in the GTHA, Vancouver, and Montreal fell further in Q1\u201925. This trend is expected to result in a significant drop in completions, leading to a historic condo crunch in the coming years.\t\t\t\t\t\t\t\t<\/div>\n\t\t\t\t<\/div>\n\t\t\t\t
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    \n\t\t\t\t\t\t\t\t\tAs the shadow condo rental market contracts, purpose-built rentals will be critical in filling the gaps.\t\t\t\t\t\t\t\t<\/div>\n\t\t\t\t<\/div>\n\t\t\t\t
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    \n\t\t\t\t\t\t\t\t\tTo capture growing rental demand over the long term, the Trust will continue to enhance its geographic diversity and portfolio strategy, delivering quality rental housing to the Residents who call our properties home while driving returns for investors.\t\t\t\t\t\t\t\t<\/div>\n\t\t\t\t<\/div>\n\t\t\t\t
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    \n\t\t\t\t\t\t\t\t\tPortfolio positioned for resilience\t\t\t\t\t\t\t\t<\/div>\n\t\t\t\t<\/div>\n\t\t\t\t
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    \n\t\t\t\t\t\t\t\t\tWith the Bank of Canada\u2019s rate-cutting cycle progressing more slowly than anticipated \u2014 and the real estate market rebound taking longer to materialize \u2014 the Trust\u2019s aggressive expansion in rapidly growing, fundamentally strong markets positions the portfolio for resilience. Beyond accretive additions, the Trust\u2019s strategy of capturing mark-to-market rent gains through natural turnover provides additional opportunities for steady, organic growth as Canadian real estate continues toward recovery.\t\t\t\t\t\t\t\t<\/div>\n\t\t\t\t<\/div>\n\t\t\t\t
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    \n\t\t\t\t\t\t\t\t\tThis has led to a widening value expectation gap between buyers and sellers, making new-build transactions more difficult in early 2025. However, value-add investments are expected to see continued transaction success, given their strong positioning within the current market cycle.\t\t\t\t\t\t\t\t<\/div>\n\t\t\t\t<\/div>\n\t\t\t\t
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    \n\t\t\t\t\t\t\t\t\tWith a focus on value-add properties and capturing gap to market, the Trust remains focused on expanding its presence in key markets, with ongoing growth in secondary Ontario regions like Guelph and continued progress on the Riverain project in Ottawa. Additionally, investment efforts are shifting westward, particularly toward British Columbia, where reduced competition for capital has created new opportunities. On the financing front, strategic mortgage conversions have strengthened the portfolio, with 97% now CMHC-insured, ensuring long-term stability and cost efficiency.\t\t\t\t\t\t\t\t<\/div>\n\t\t\t\t<\/div>\n\t\t\t\t
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    \n\t\t\t\t\t\t\t\t\tLooking ahead, interest rates are expected to stabilize in the lower neutral range (2.5%-3%) by year-end 2025. Persistent supply shortages in the GTA and other major markets will continue to drive upward pressure on rental and for-sale housing prices in the coming quarters and years, as declining housing starts to translate into a deeper supply deficit. While political uncertainty remains a factor, favourable policy shifts could accelerate recovery in the latter half of the year. The Trust is well-positioned to capitalize on these conditions through strategic acquisitions and prudent financial management.\t\t\t\t\t\t\t\t<\/div>\n\t\t\t\t<\/div>\n\t\t\t\t
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    Find Equiton\u2019s previous quarterly report here:\u202f 2024 Market Commentary and 2025 Outlook<\/span><\/a><\/p>\t\t\t\t\t\t\t\t<\/div>\n\t\t\t\t<\/div>\n\t\t\t\t

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    Informations prospectives<\/p>\t\t\t\t\t\t\t\t<\/div>\n\t\t\t\t<\/div>\n\t\t\t\t

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    Certain information in this communication contains \u201cforward-looking information\u201d within the meaning of applicable securities legislation.<\/p>\t\t\t\t\t\t\t\t<\/div>\n\t\t\t\t<\/div>\n\t\t\t\t

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  • Forward-looking information may relate to future events or the Trust\u2019s performance.<\/li>\n\t\t\t\t\t\t\t\t<\/div>\n\t\t\t\t<\/div>\n\t\t\t\t
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  • Forward-looking information includes, but is not limited to, information regarding the Trust\u2019s distributions, growth potential and volatility, investor returns, ability to achieve operational efficiencies, objectives, strategies to achieve those objectives, beliefs, plans, estimates, projections and intentions; and similar statements concerning anticipated future events, results, circumstances, performance or expectations and other statements that are not historical facts. These statements are based upon assumptions that the management of the Trust believes are reasonable, but there can be no assurance that actual results will be consistent with these forward-looking statements.<\/li>\n\t\t\t\t\t\t\t\t<\/div>\n\t\t\t\t<\/div>\n\t\t\t\t
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  • Forward-looking information involves numerous assumptions, known and unknown risks, and uncertainties that contribute to the possibility that the forward-looking statements will not occur and may cause actual results to differ materially from those anticipated in such forward-looking statements. Some of these risks are discussed in the section \u201cRisk Factors\u201d in the Offering Memorandum. These forward-looking statements are made as of the date of this communication and the Trust is not under any duty to update any of the forward-looking statements after the date of this communication other than as otherwise required by applicable legislation.<\/li>\n<\/ul>\t\t\t\t\t\t\t\t<\/div>\n\t\t\t\t<\/div>\n\t\t\t\t\t<\/div>\n\t\t\t\t<\/div>\n\t\t
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