This 576,346-square-foot Class A industrial portfolio consists of four buildings located within Southgate Business Park in Guelph, Ont.SUPPLIED BY CANFIRST
Commercial real estate is a welcome addition to many portfolios, adding long-term growth, steady income and lower volatility than more high-flying sectors. Within this diverse asset class, the case for one subsector is growing: industrial.
Compared to office and retail, industrial real estate tends to be more resilient. That’s because it serves essential economic functions as opposed to discretionary demand.
“Canadian industrial real estate has the characteristic of being able to weather challenging economic cycles,” says Mark Braun, executive vice-president of investments at CanFirst Capital Management.
The subsector includes properties such as warehouses, distribution centres, logistics hubs, manufacturing and data centres. These are core elements of the economy, which store, processes and deliver the goods and services businesses and consumers alike rely on every day.
Industrial real estate has proven to be a source of growth for portfolios as well as a defensive holding during times of economic uncertainty.
“Certainly, pre-COVID and through COVID, industrial real estate experienced explosive growth,” Mr. Braun says.
Although a 2025 Real Estate Institute of Canada report found that industrial real estate experienced a pullback – the result of a combination of tariffs, oversupply and an e-commerce slowdown – Mr. Braun says ignoring the subsector today is a missed opportunity. CanFirst IncomePlus Real Estate Fund (CIPREF) provides a way for investors to add industrial real estate to their portfolios.
Interior of a CanFirst-owned manufacturing facility and warehouse in Vaudreuil, Que.SUPPLIED BY CANFIRST
The rationale for doing so is broad. For one, “industrial properties tend to have steadier cash flows,” Mr. Braun says, as tenants have longer leases than those for multi-family properties.
Another upside is industrial real estate’s exposure to consumer staples, which are among the most durable industries even during economic downturns.
A favourable supply-demand imbalance could lead to even stronger growth. “Even though Canada has a lot of land, most of it isn’t suitable for industrial use,” Mr. Braun says.
CIPREF has long focused on the Greater Toronto Area and other major markets with good infrastructure supporting logistics and manufacturing tenants.
“There is just such a broad mix of demand for properties in Canada’s biggest cities,” he says.
The fund’s strategy has been to acquire high-quality assets in these markets and fill them with equally solid tenants. “Right now, our average lease term is six years. We have some tenants with leases as long as 15 years.”
Should tenants leave when terms end, expiring leases are often 20 per cent or more below the market, Mr. Braun adds. “So, we don’t necessarily need to achieve the highest rent to lease it out again.”
As well, savvy investors – CanFirst included – find arbitrage opportunities as these properties are often worth more to businesses that use them than to the investors, he says. Users of industrial space need a place to operate. Consequently, many are willing to purchase assets outright.
“It will cost materially more to build a property than to buy an existing one. Additionally, an owner/user will pay a premium to own a property over what an investor such as CanFirst would pay,” Mr. Braun says.
Traditionally, he says investors in the subsector had to make a trade-off. Industrial real estate was more consistent, avoiding commercial real estate’s worst lows, but the upsides weren’t as high. But CIPREF has had annual returns of 10 per cent to 13 per cent, along with 4 per cent to 6 per cent distributions.
What’s more, demand for industrial real estate is growing, with the likes of the largest occupiers such as Amazon.com Inc. and Walmart Inc. looking for more warehouse space, Mr. Braun says.
“If there’s a slowdown, rents may not grow as quickly, although they will remain resilient. And if we get any growth, which we believe will happen, industrial is well positioned to grow over the next 24 months.”
Advertising feature produced by Globe Content Studio with CanFirst Capital Management. The Globe’s editorial department was not involved.