Q1 2025 Market Overview
- 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’s economy showed resilience in Q1’25 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.
- 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 in March despite a modest uptick in February inflation, citing heightened trade tensions. Rate reductions in recent quarters have eased conditions for debt financing and have begun to encourage renewed real estate activity.
- More renters signalled plans to stay in the rental market last quarter. The BoC’s Q1’25 consumer survey 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.
- Housing starts ended the quarter down 12.5% Y/Y 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.
- While unemployment edged up to 6.7% in March 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.
- Although average asking rents dipped 2.8% Y/Y 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.
- Party leaders in Canada’s 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.
Portfolio Update
Regional market diversification drove steady growth
Amid 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.
Purchased in Q4’24 at an attractive cap rate, the Trust’s most recent acquisition — a newly built, 277-unit rental complex in Edmonton — included 112 vacant units. Supported by an active marketing campaign highlighting the property’s modern amenities, attractive location outside the city core, and spacious suites, occupancy rates exceeded pro forma. This early success validates the property’s potential for future performance.
Meanwhile, the Trust continues to unlock value in the portfolio of four properties acquired in Welland, Niagara Region, in Q2’24. Leasing efforts benefited from growing interest among downsizers and young families, as well as property enhancements made through the Trust’s capital investment program which contributed to rental growth of approximately 40% on natural turnover. As at Q1’25, the properties’ gap to market remains at 63%, signalling strong potential for future growth.
This value growth underscores the strength of the Trust’s diversified investment across both geography and risk strategy. The Trust’s 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’s footprint in Alberta allows the Trust to gain further operational economies of scale, and Management continues to monitor the region for future acquisition opportunities.
Ongoing urbanization trends in Ontario continue to support the Trust’s presence in high-demand markets such as Toronto’s urban core, key secondary markets across the GTHA, and Ottawa, where rental housing remains critically undersupplied.
Active rental development progressing
Lease-up for Tower 1 of the Trust’s ongoing rental development project in Ottawa, Maison Riverain, progressed well in Q1’25, with the first Residents welcomed home in early Q2’25. 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’s in-house property management team as a key contributor to early success. Progress on Tower 2 continues as planned.
Sustainability initiatives
The Trust’s 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.
Expanding industry knowledge through key insights, the Trust’s partnership with Concordia University’s 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.
Fund Performance & Strategic Positioning
The Trust’s 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’s debt coming due over the next five years — providing cash flow stability — 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.
The 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 Q1’24. 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.
Occupancy 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’s gap to market remained healthy at 28.7%, narrowing slightly from 30.9% in Q4’24. This stable gap underscores the Trust’s ability to unlock organic growth and deliver stable performance, even amid ongoing public market volatility. With 2024 marking the Trust’s most active year of acquisitions to date, early signs of value creation are already visible, supporting long-term investor outcomes.
Outlook and Portfolio Strategy
Further rate cuts expected
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.
Canadian equity and real estate markets, broadly, appeared less responsive to the typically stimulative effect of falling interest rates. In Q1’25, 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.
Rental markets demonstrate strong fundamentals
Urbanization 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 — particularly in cities where newcomers drive much of the market — overall immigration-led population growth remains historically high. At the same time, internal migration from rural to urban areas continues, compounding demand pressures.
Purpose-built rental completions in the GTHA, one of Canada’s 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.
By contrast, new condominium apartment starts in the GTHA, Vancouver, and Montreal fell further in Q1’25. This trend is expected to result in a significant drop in completions, leading to a historic condo crunch in the coming years.
As the shadow condo rental market contracts, purpose-built rentals will be critical in filling the gaps.
To 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.
Portfolio positioned for resilience
With the Bank of Canada’s rate-cutting cycle progressing more slowly than anticipated — and the real estate market rebound taking longer to materialize — the Trust’s aggressive expansion in rapidly growing, fundamentally strong markets positions the portfolio for resilience. Beyond accretive additions, the Trust’s 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.
This 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.
With 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.
Looking 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.
Find Equiton’s previous quarterly report here: 2024 Market Commentary and 2025 Outlook
Q1 2025 Market Commentary and Outlook – Private Canadian Rentals a Bright Spot Amid Volatility
Q1 2025 Market Overview
Portfolio Update
Regional market diversification drove steady growth
Amid 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.
Purchased in Q4’24 at an attractive cap rate, the Trust’s most recent acquisition — a newly built, 277-unit rental complex in Edmonton — included 112 vacant units. Supported by an active marketing campaign highlighting the property’s modern amenities, attractive location outside the city core, and spacious suites, occupancy rates exceeded pro forma. This early success validates the property’s potential for future performance.
Meanwhile, the Trust continues to unlock value in the portfolio of four properties acquired in Welland, Niagara Region, in Q2’24. Leasing efforts benefited from growing interest among downsizers and young families, as well as property enhancements made through the Trust’s capital investment program which contributed to rental growth of approximately 40% on natural turnover. As at Q1’25, the properties’ gap to market remains at 63%, signalling strong potential for future growth.
This value growth underscores the strength of the Trust’s diversified investment across both geography and risk strategy. The Trust’s 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’s footprint in Alberta allows the Trust to gain further operational economies of scale, and Management continues to monitor the region for future acquisition opportunities.
Ongoing urbanization trends in Ontario continue to support the Trust’s presence in high-demand markets such as Toronto’s urban core, key secondary markets across the GTHA, and Ottawa, where rental housing remains critically undersupplied.
Active rental development progressing
Lease-up for Tower 1 of the Trust’s ongoing rental development project in Ottawa, Maison Riverain, progressed well in Q1’25, with the first Residents welcomed home in early Q2’25. 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’s in-house property management team as a key contributor to early success. Progress on Tower 2 continues as planned.
Sustainability initiatives
The Trust’s 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.
Expanding industry knowledge through key insights, the Trust’s partnership with Concordia University’s 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.
Fund Performance & Strategic Positioning
The Trust’s 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’s debt coming due over the next five years — providing cash flow stability — 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.
The 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 Q1’24. 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.
Occupancy 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’s gap to market remained healthy at 28.7%, narrowing slightly from 30.9% in Q4’24. This stable gap underscores the Trust’s ability to unlock organic growth and deliver stable performance, even amid ongoing public market volatility. With 2024 marking the Trust’s most active year of acquisitions to date, early signs of value creation are already visible, supporting long-term investor outcomes.
Outlook and Portfolio Strategy
Further rate cuts expected
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.
Canadian equity and real estate markets, broadly, appeared less responsive to the typically stimulative effect of falling interest rates. In Q1’25, 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.
Rental markets demonstrate strong fundamentals
Urbanization 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 — particularly in cities where newcomers drive much of the market — overall immigration-led population growth remains historically high. At the same time, internal migration from rural to urban areas continues, compounding demand pressures.
Purpose-built rental completions in the GTHA, one of Canada’s 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.
By contrast, new condominium apartment starts in the GTHA, Vancouver, and Montreal fell further in Q1’25. This trend is expected to result in a significant drop in completions, leading to a historic condo crunch in the coming years.
As the shadow condo rental market contracts, purpose-built rentals will be critical in filling the gaps.
To 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.
Portfolio positioned for resilience
With the Bank of Canada’s rate-cutting cycle progressing more slowly than anticipated — and the real estate market rebound taking longer to materialize — the Trust’s aggressive expansion in rapidly growing, fundamentally strong markets positions the portfolio for resilience. Beyond accretive additions, the Trust’s 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.
This 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.
With 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.
Looking 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.
Find Equiton’s previous quarterly report here: 2024 Market Commentary and 2025 Outlook
Forward-Looking Information
Certain information in this communication contains “forward-looking information” within the meaning of applicable securities legislation.
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