Income-producing real estate like distribution centres, reflecting macro trends, are making for more appealing investment opportunities.Getty Images
Ask a group of advisors what asset class gives their clients the most confidence, and many of them will say real estate. It’s tangible. It’s visible. It’s something you can walk through and point to. Unlike equities or bonds, property feels far less abstract or prone to market vagaries.
For high-net-worth Canadians, real-estate exposure is no longer simply about owning a condo, an office building or a strip mall. Inside professionally managed portfolios, it has evolved. Today, it’s a strategy that’s structured, diversified, and increasingly accessed through vehicles designed to generate income and hedge volatility.
To understand how real estate fits into a client’s overall financial picture, Richard MacDonald, senior advisor and portfolio manager at North Rock Advisory in Calgary, part of Scotia Wealth Management, first considers an investor’s total holdings, including primary residences or vacation properties.
“In many cases, they might be overweight in real estate personally to begin with,” he says.
For that reason, his team avoids automatically layering 20 per cent to 25 per cent real estate allocations into portfolios, as pension funds might. Exposure is selective, often serving a specific income objective. “We look at it from a holistic perspective,” he explains.
With traditional fixed income yields fluctuating and, at times, failing to meet client return targets, advisors have increasingly looked to real estate to generate cash flow needs. That can span public REITs to private credit structures.
Mr. MacDonald points to sale-leaseback strategies in private funds as a preferred example. In these arrangements, corporations sell properties like distribution centres or offices to investors and lease them back under long-term agreements. Under triple-net leases, tenants typically pay not only rent but also property taxes, insurance and maintenance costs. That provides investors with predictable cash flows.
For high-net worth investors, Mr. MacDonald suggests that such private credit structures or vehicles can serve as partial bond substitutes. Instead of a government bond that yields modest returns, clients gain exposure to income streams backed by often-investment-grade-rated corporate tenants under long-duration contracts.
The trade-off is liquidity. Many private vehicles include lock-up periods for months or a year. Investors must be comfortable tying up capital in exchange for yield enhancement. If they are, the income premium can justify the wait, Mr. MacDonald says.
Strong satellite position
Many advisors view real estate and mortgage investment strategies primarily as satellite positions that can offer diversification and enhanced yield potential for income-oriented portfolios.
“For us, a client would get up to a maximum 2 per cent to 5 per cent in any account,” says Jennifer Tozser, senior advisor and portfolio manager at Tozser Wealth Management in Calgary, part of National Bank Financial Wealth Management.
Rather than pursuing domestic options, she prefers targeted opportunities abroad, where higher rates in lending markets and total return dynamics are more compelling. “We are much more interested in global real estate.”
The evolution of real-estate investing also reflects structural macro shifts, according to Jillian Bryan, senior advisor and portfolio manager with TD Wealth Private Investment Advice in Vancouver.
She focuses on income-producing real estate that reflects modern economic trends, which primarily include logistics hubs, distribution centres and digital infrastructure assets. The sectors benefit from secular tailwinds rather than cyclical demand alone. “These are assets that can provide inflation-linked cash flow streams over time,” she says.
Private structures offer another advantage: more even return profiles than with the more volatile public market investments. “You get this long compounding, smoother performance,” Ms. Bryan explains.
For longer-term capital that clients don’t need access to for years, she says private exposures can align well with wealth preservation and compounding objectives.
Expanding access, broadening opportunity
Lower minimums and more flexible liquidity windows have opened more real estate strategies up to a wider segment of accredited investors, Mr. MacDonald says.
This democratization allows family office and higher-net-worth clients to participate in institutional-style opportunities, from private credit funds to niche property strategies, without the once-prohibitive barriers of multimillion-dollar commitments.
“It’s not nearly the hurdle it was not long ago,” he says.
Real-estate exposures can now be calibrated across public REITs, private structures and global vehicles, depending on client goals. To Mr. MacDonald, such exposures can enhance income inside a fixed-income sleeve. To Ms. Toszer, global and selectively sized allocations offer diversification. To Ms. Bryan, private real estate fits within a broader alternatives strategy aligned to long-term capital.
Regardless of the objective, the security many investors have long associated with property now comes in a wider array of ways. That has transformed the asset class into a more comprehensive component of modern portfolio construction and overall client wealth management.
“There’s much more accessibility now,” Mr. MacDonald says.