Despite short-term headwinds and headlines, institutional investors must maintain conviction in their long-term strategy, focusing on portfolio construction to build resiliency and generate compelling risk-adjusted returns, according to Michael Tsourounis, managing partner and head of real estate at Hazelview Investments.
During a session at the Canadian Investment Review’s 2025 Alternative Investment Conference, he said the best way to achieve those goals right now is by investing directly in Canadian multi-residential assets, small- and mid-bay industrial assets and real estate debt.
The multi-residential sector is supported by strong supply and demand dynamics, driven by population growth, rising homeownership costs and a sharp decline in construction starts that will ultimately result in less supply in the coming years. The sector is also characterized by stable occupancy and a diversified tenant base, resulting in lower volatility and more predictable cash flows than in other sectors.
Read: 2025 E&F Investment Forum: A look at the opportunity in Canadian multi-residential investments
Tsourounis also pointed to several market conditions that are creating an attractive entry point, including higher capitalization rates, less competition to acquire assets and a stabilizing interest rate environment. “Investing in an asset class where there’s favourable forward-looking supply and demand fundamentals provides the foundation to generate strong returns.”
To generate alpha in a portfolio, it’s also important to devise strategies to add value, added Tsourounis, noting these strategies need to focus on being able to increase revenue, optimize operating margins, manage capital costs and be hyper-focused on customer satisfaction. “Those are simply table stakes, but we believe the backdrop right now is incredibly strong and, given the softness in today’s market, it provides a real, unique opportunity to acquire assets at an extremely attractive basis.”
There are also foundational, long-term fundamentals in industrial real estate, particularly small- and mid-bay products, he said, highlighting demographic growth, supply chain shifts and the rise of e-commerce as examples.
“Small- and mid-bay product often have replacement costs that are much higher due to high land values in urban markets. There’s less favourable zoning and coverage ratios today on these urban land sites for industrial, which makes building new product much more challenging and less efficient.”
Read: Caisse real-estate arm partnering to provide retail tenants with e-commerce solutions
This segment of the market has seen a lot more selling by institutional investors in the last few years, noted Tsourounis, which provides a unique acquisition opportunity. “And on industrial, just like multi-residential, you need to have active asset management, robust leasing strategy and a deep understanding of both tenants’ needs and restrictions in order to grow your cashflows.”
He also recommended investing in real estate debt or commercial mortgages, pointing to enhanced yield through diversification and stable income returns. It’s also important for institutional investors to understand metrics like debt exposure on a per foot basis, the debt yield of that mortgage investment and what future liquidity actually looks like.
“This allows debt investors to properly price risk, avoid taking equity-like risk and getting paid debt-like returns.”
Read more coverage of the 2025 Alternative Investment Conference.