The Steady Pulse of Canadian Rentals: Why Multi-Suite REITs Are the Anchor in a Shifting Economy

As global trade tensions simmer and economic uncertainty looms, investors are searching for assets that can weather volatility while offering steady returns. Canada's multi-suite residential rental market emerges as a compelling choice, buoyed by a stubborn supply-demand imbalance, resilient demand drivers, and the proven track record of REITs like Morguard (MGU.UN). In this analysis, we dissect why multi-suite residential real estate—a sector often overlooked in favor of more “exciting” investments—should anchor portfolios seeking both yield and stability.

The Supply-Demand Tightrope: A Structural Advantage

The Canadian rental market's core strength lies in its fundamental imbalance. Despite a surge in apartment completions (+32.4% year-over-year in 2024), supply remains outstripped by demand, particularly in urban centers like Calgary and Toronto. Take Calgary, where vacancy rates dipped to 1.4% in 2023, fueling a 14.3% jump in 2-bedroom rents—the fastest pace in over a decade. This dynamic is no fluke: immigration-driven population growth, high home prices pushing renters into apartments, and the affordability crisis in owner-occupied housing have created a “no retreat” demand base.

Even as national vacancy rates rose to 4.0% in early 2025—the highest since 2020—this reflects regional disparities rather than a systemic oversupply. In markets like Vancouver's South Fraser region, zoning reforms and suburban expansion are attracting developers, but cost barriers (land prices, labor shortages) and financing constraints limit rapid scaling. The result? A market where rents remain structurally upward-biased, even in weaker economic cycles.

Morguard's Playbook: Quality Assets as a Hedge Against Uncertainty

Morguard's 2025 performance underscores the sector's defensive qualities. Despite a 0.7% dip in Adjusted NOI (driven by office-sector headwinds), its multi-suite residential segment thrived, with average monthly rents rising and occupancy holding firm at 96%. The REIT's focus on core-quality assets—like its LEED Gold-certified Xavier in Chicago—ensures resilience. These properties are not speculative bets on growth; they're income-producing machines in high-demand urban cores.

The numbers tell the story: Morguard's liquidity ($278M cash) and low-cost debt (4.55% average interest rate) provide a buffer against rising defaults or tenant turnover. Even as U.S. tariffs and Canadian election uncertainty cloud the outlook, Morguard's geographic diversification (43 properties across Canada and the U.S.) and tenant base (no reliance on single tenants like The Bay) insulate it from sector-specific shocks.

Why REITs Are Recession-Proof (Sort Of)

Multi-suite REITs aren't recession-proof, but they're among the most recession-resistant asset classes. Here's why:
1. Inelastic Demand: Unlike retail or office space, rental housing is a necessity. Even in downturns, people must live somewhere.
2. Prepaid Income: Rents are collected upfront, creating cash flow visibility that's rare in volatile markets.
3. Deflationary Safeguards: While rising vacancies can pressure rents, the sector's operational leverage—lower costs for well-maintained assets—buffers margins.

Take Morguard's strategy: by prioritizing re-leasing efforts (e.g., pushing Penn West Plaza's occupancy to 80% post-lease expirations) and focusing on high-quality properties, it ensures cash flow stability. This isn't just about surviving a downturn—it's about thriving by acquiring distressed assets at discounts once the cycle turns.

The Investment Case: Yield Now, Stability Later

For investors, the calculus is clear:
- Income: Multi-suite REITs offer dividend yields averaging 4–6%, far above bond rates and with less interest-rate sensitivity.
- Capital Preservation: While real estate is not immune to price declines, the rental market's inherent demand stability limits downside risk.
- Diversification: Pairing REITs with traditional equities or bonds reduces portfolio volatility.

Morguard's dividend of $0.20 per share, backed by a positive credit rating upgrade (DBRS Limited), signals confidence in its ability to sustain payouts even amid economic headwinds. Meanwhile, its focus on industrial and multi-suite assets—sectors less prone to trade disruptions—aligns with the need to hedge against global risks.

Conclusion: Anchoring Portfolios in Turbulent Waters

In an era of trade wars and economic uncertainty, the Canadian rental market's structural tailwinds—immigration, affordability, and zoning constraints—make it a rare “buy and hold” opportunity. Morguard exemplifies how disciplined asset allocation to core-quality REITs can deliver steady returns while shielding portfolios from volatility.

Investors should prioritize multi-suite residential REITs like Morguard for two reasons:
1. They're recession-resistant, leveraging inelastic demand and prepaid income models.
2. They offer asymmetric risk/reward: limited downside in downturns and upside as the cycle recovers.

The trade tensions and macroeconomic clouds may linger, but the steady pulse of rent checks will keep beating. For the cautious investor, that's a rhythm worth following.

This analysis is for informational purposes only and should not be construed as financial advice. Always conduct independent research or consult a financial advisor before making investment decisions.