5 Best Industrial REITs for Canadians

Introduction to Industrial REITs

Investing in real estate has always been a popular choice for many individuals looking to diversify their investment portfolio. Within the real estate industry, one specific asset class that has gained significant attention in recent years is industrial real estate investment trusts (REITs).

These REITs invest in industrial properties such as warehouses and industrial spaces, and offer investors a unique opportunity to participate in the growth of the industrial sector.

Not all REITs are created equal.

The pandemic has drawn a line between industrial REITs and residential REITs, and office and retail. The former has benefitted from the explosion in e-commerce, work-from-home and the migration to the suburbs, while the latter have languished from lockdowns.

What are Industrial REITs?

Industrial REITs, also known as industrial real estate investment trusts, are companies that own and manage industrial properties. These properties are typically used for manufacturing, warehousing, logistics, and other industrial purposes. Industrial REITs generate income by leasing out their properties to tenants who require industrial space for their operations.

Advantages of investing in Industrial REITs

Investing in industrial REITs has several advantages. Firstly, industrial properties tend to have long-term tenant leases, which provide stability and predictable cash flow to the REITs. Additionally, the demand for industrial space is driven by factors such as e-commerce growth and the need for efficient supply chain logistics. This continued strong demand for industrial properties has resulted in rent growth and increased occupancy rates for industrial REITs.

Risks of investing in Industrial REITs

Like any investment, there are also risks associated with investing in industrial REITs. One risk is the potential impact of rising interest rates. As industrial REITs rely on borrowing to acquire properties, an increase in interest rates can lead to higher borrowing costs, potentially affecting their cash flow and profitability. Additionally, economic downturns or changes in consumer behavior can impact the demand for industrial properties, leading to increased vacancy rates and lower rental income for REITs.

Overview of the Industrial REIT sector

The industrial REIT sector is an important component of the overall real estate investment trust industry. The sector includes companies that own and operate industrial properties across various regions. These properties can range from small warehouses to large logistics facilities.

The sector has experienced growth in recent years due to the rise of e-commerce and the increased demand for efficient supply chain logistics.

Best Canadian Industrial REIT Stocks to Buy Now

H&R Real Estate Inv Trust (HR.UN-T)

H&R Real Estate Inv Trust (HR.UN-T) — Stockchase

Great properties, but diversification means it doesn't get a great valuation from the market. Sunbelt properties are over-supplied. Owns office properties and retail. Transforming to multi-family and industrial. Trade action starting to pick up. Secure yield of about 6.7%. Growth will be a while, depends on your time horizon. Better names in the meantime.

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H&R Real Estate Inv Trust (HR.UN-T) is one of the largest industrial REITs in Canada.The company owns a diverse portfolio of industrial properties, including warehouses and distribution centers. H&R Real Estate Inv Trust has a strong track record of delivering steady cash flow and dividends to its investors. The REIT also benefits from long-term leases with reputable tenants, providing stability and income to its shareholders.

In 2022, H&R spun-off its shopping malls into Primaris, and awarded shareholders one share in Primaris for every four H&R stock. Hence the nearly 20% drop in HR.UN-T at that time.  The stock might be at an attractive price today, presenting a compelling opportunity for potential investors to consider.

Summit Industrial Income REIT (SMU.UN-T)

SUMMIT INDUSTRIAL INCOME REIT RCPTS (SMU.UN-T) — Stockchase

(A Top Pick Sep 28/22, Up 45%) Got taken out. Traded at a 25% discount in a sector that was in high demand.

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Summit Industrial Income REIT (SMU.UN-T) focused on acquiring and managing light industrial properties across Canada. Unfortunately, Summit has been acquired and is not trading anymore.

Granite REIT (GRT.UN-T)

Granite REIT (GRT.UN-T) — Stockchase

Diversified industrial globally. High quality properties. 10-12% discount to NAV. Focused on larger part of the market (over 300k square feet), where there's more vacancy. It needs to work through that. Likes the sector, stock's interesting at this level, keep owning it if you do.

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Granite REIT (GRT.UN-T) is a leading Canadian industrial REIT that owns and operates industrial properties in North America and Europe. The company specializes in logistics facilities, with a focus on cold storage and other specialized industrial assets. Granite REIT has a strong track record of delivering stable cash flows and attractive dividend yields to its shareholders. The REIT’s strategic focus on the growing cold storage sector has positioned it well to benefit from the increasing demand for temperature-controlled warehousing and distribution facilities.

This is another REIT sailing around highs and for good reason. Though based in Toronto, Granite REIT holds 50%+ of its portfolio in the U.S. plus about 20% in Canada and smaller amounts in Austria, Holland, Germany and Czechia. In terms of revenue compared to floor space in the portfolio, Canada slightly underperforms while America is inline and Austria punches above its weight.

Dream Industrial REIT (DIR.UN-T)

Dream Industrial REIT (DIR.UN-T) — Stockchase

(A Top Pick Sep 27/23, Up 10%) Attractive valuation, about 25-30% undervalued. Last-mile distribution. Europe is seeing positive fundamentals, especially in the Netherlands and Germany. Add on weakness, sell on strength.

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Dream Industrial REIT (DIR.UN-T) is an exciting investment opportunity for those seeking growth and stability in the industrial real estate sector. With a strong track record of success and a portfolio of high-quality properties, DIR.UN-T is poised for continued growth and profitability.

Investing in this REIT allows you to be a part of the thriving industrial real estate market, which is experiencing strong demand and high rental rates. 

Best USA Industrial REIT Stocks to Buy Now

In addition to Canadian Industrial REIT stocks, you might want to add the Best Industrial REIT stocks from the USA to your portfolio. If you’d like to have one US ticker in your portfolio, we think it should be PLD-N.

Prologis (PLD-N) 

Prologis (PLD-N) — Stockchase

It's the largest provider of industrial real estate in the world, publicly traded, around 2-3% of global GDP flows through their buildings. E-commerce if fueling industrial RE, such as Amazon. Also, PLD uses analytics to help increase the flow of goods through their buildings. However, many people built such buildings, then higher interest rates drove…

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Prologis REIT (PLD-N) is a highly promising investment opportunity that you don’t want to miss out on. With its strong track record of success and proven ability to deliver consistent growth, this REIT is a game-changer in the real estate industry. Prologis REIT specializes in the development, acquisition, and management of modern logistics facilities, catering to the ever-growing e-commerce market. In today’s fast-paced world, online retail is booming, and this REIT is perfectly positioned to capitalize on this trend.

Their strategic locations, state-of-the-art facilities, and top-notch management team make them a force to be reckoned with. Investing in Prologis REIT means investing in the future, as they continue to expand their footprint globally and attract high-quality tenants.  Some of Prologis biggest customers include Amazon.com Inc. (AMZN), FedEx Corp. (FDX) and Home Depot Inc. (HD).

Conclusion

Investing in industrial REITs can be a rewarding strategy for those looking to add exposure to the industrial real estate market. The sector offers the potential for steady cash flow, attractive dividend yields, and the opportunity to participate in the growth of the industrial sector. However, as we always have to remind you, it is important for investors to carefully consider the risks and conduct thorough research before making investment decisions.