Why Canadian retail REITs are “hitting the jackpot”

North of the border, mixed-use development is seen as a savior

(From back: Max Pixel, Piotr Siedlecki)
(From back: Max Pixel, Piotr Siedlecki)

Retail REITs are catching a break via seemingly counter-intuitive circumstances.

According to the Financial Post, Canadian REITs such as RioCan, SmartCentres and Choice Properties are launching residential developments with retail components, despite what seems like a hostile environment– namely, interest rates poised to climb and rising mortgage costs.

But the former is actually helping retail REITs looking to take a left turn into resi development, according to Canaccord Genuity analyst Mark Rothschild.

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“If they raise rates, what happens is, it becomes more difficult to buy single-family homes or to buy condos. So raising rates actually helps the rental apartment market and makes the business case to build rentals even more compelling,” he told the Post.

So long as city population continues to grow and local zoning ordinances keeping requiring mixed-use properties as a condition for approving increased density, Canada’s retail REITs are expected to capitalize big time on their often underused properties. [FP]Erin Hudson