This article is part of our September special report on real estate in Canada.
The long love affair that Canada’s family offices have had with real estate has hit a bumpy patch—to put it mildly.
For the better part of four decades, a falling interest rate environment, a growing population and robust economic growth have been tailwinds for what has been a foundational asset for many families of wealth.
“Canadian family offices by and large have been overweight in real estate, especially Canadian real estate, for an extended period of time,” says Voyt Krzychylkiewicz, head of global family and institutional wealth for UBS Canada.
“It worked in a falling interest rate environment that led to cap rates continuing to compress.”
Yet amid higher borrowing costs, depressed valuations and, in turn, higher cap rates, could Canadian family offices finally be falling out of love with real estate?
Real estate remains a core asset, but …
Make no mistake: real estate continues to be a core asset for many family offices globally. A recent study in the Journal of Investment and Finance reports that real estate accounts for about 14 per cent, on average, of family office portfolios—the equivalent of venture capital, private credit and hedge funds combined. Real estate trails only stocks (26 per cent) and private equity (17 per cent) in terms of portfolio allocation.
Yet in Canada, many family offices may be rethinking their exposure to real estate. The 2025 Canadian Family Offices’ Multi-Family Office Landscape survey found that only 19 per cent multi-family offices increased exposure to real estate in the final six months of last year. That is the lowest percentage among asset classes outside of cryptocurrencies.
As well, 14 per cent of responding family offices indicated decreasing allocations to real estate, while 48 per cent said they kept their exposure the same. Only nine per cent of had no exposure to real estate.
Historical exposure
Founder and chief executive officer Arthur Salzer of Northland Wealth Management, a multi-family office based in Calgary and Oakville, Ont., says many Canadian families have built their wealth in real estate and are unlikely to shift gears anytime soon.
“My own family has been investing in residential real estate since the early 70s,” he adds. Their exposure has not been reduced, but new capital is allocated toward parts of the asset class with more upside potential.
Ultra-high-net-worth Canadian families have long had good reason to invest in real estate, Salzer says. It has experienced excellent growth for decades and, with the exception of office and retail, through the pandemic.
That run of performance changed in March 2022 when inflation surged, however. One of the steepest interest rate hike cycles in decades adversely affected all asset classes, including real estate.
Yet the reality is that real estate investments have faced headwinds created by a “confluence of factors” over the past four years, says Krzychylkiewicz.
Issues facing family offices
High interest rates, reduced demand from falling immigration, economic uncertainty pausing business decisions, and higher labour costs have weighed on the asset class. Valuations fell and remain depressed. In turn, cap rates increased.
Meanwhile, some Canadian private real estate funds, facing growing liquidity demands, gated redemptions as their non-liquid assets experienced falling valuations and growing operating costs.
“It’s hard to get your capital out,” Krzychylkiewicz says, noting that many Canadian family offices also have direct ownership. “In many cases, family offices are stuck with their exposure.”
Yet amid higher cap rates, a sense that inflation could remain higher than past decades, and constrained supply due to a lack of new development across most sub-sectors, real estate may have reached its bottom.
“The kind of comment we are hearing now is, ‘How much worse can it really get from here?’” Krzychylkiewicz says.
Higher yields are beginning to be a draw. At close to seven per cent compared with below five per cent in 2021, cap rates might be offering an attractive opportunity.
“The families with large real estate exposure already are probably not allocating more,” he says, “but those not as overweight are potentially looking to do so given more attractive yields.”
Real estate sectors
Not all sub-sectors are equal, however. The industrial sector is among the more resilient.
“Industrial has simply started from a more stabilized position than other real estate sectors,” says Quinntin Fong, senior vice-president and fund manager with Fiera Real Estate in Toronto. Fong manages the Fiera Real Estate Industrial Fund, which focuses on small- and mid-bay properties.
It is “a niche strategy” that attracts many family offices. This corner of industrial real estate has not seen as much new supply as large-scale assets serving warehousing needs for e-commerce giants like Amazon. Small- and mid-bay “has always been constrained for supply,” Fong says.
Multi-family residential has experienced more downside, after a strong period of demand in the pandemic and afterward until 2022. That is especially true in Canada’s largest markets, Toronto and Vancouver.
“We’ve been investing in multi-family for clients since 2012,” Salzer says. Yet since 2019, Northland has limited growing that exposure because the sub-sector had become much more competitive, and costs are higher.
Today, multi-family remains fundamentally strong, with vacancy rates in the “two to three per cent range,” he adds. Yet challenges remain, because significant new supply is coming online amid lower immigration. “You can see values slowly trending down over the next two to five years as opposed to the annual increases seen in decades before.”
Salzer adds that office and retail face more challenges even amid the return-to-office trend and a resurgence in in-person shopping. “We still don’t have exposure,” he says, because growth is likely more limited.
Like many family office investors, Northland is patient. “We are invested in a few funds that were gated, for example, but we see gating as a good thing because it protects our capital.”
He posits that the growing demand for redemptions was less about financial shocks in real estate and more about investors seeking to re-allocate capital, chasing soaring prices for publicly traded technology stocks.
The returns in private real estate have been more muted by comparison, “in the sub-five per cent range,” Fong says, pointing to the MSCI/REALPAC Canada Annual Property Index, a benchmark for private real estate in Canada.
A look ahead
Better days may be ahead, at least for industrial. “Businesses that had been slow making leasing decisions are back at the table,” Fong adds.
As well, many family offices are seeking opportunities outside of Canada. Krzychylkiewicz notes that this is a shift from previous decades, when many families typically had a local market focus. “If you’re a Toronto family, for example, you owned Toronto assets,” he says. Yet while it’s not yet a sea change, given that families with direct exposure are unlikely to exit, it’s likely that incremental new dollars to the asset class are flowing to other geographies.
Northland illustrates this trend. It has grown its exposure to European multi-family and data centres over the last few years, Salzer says.
“Hyperscaler ratings are AAA, and if you can generate a return of 20 to 30 per cent a year by building something that’s custom to these big tech companies, that’s a very good return for the risk,” he adds, although he acknowledges the risks associated with peaking niche sectors. “That demand won’t last forever, but you want to be there for the next five years.”
More broadly, real estate is at a crossroads. Conditions could improve as supply tightens due to constraints on new development and as demand rebounds, Krzychylkiewicz says.
“Maybe we muddle along for a period of more uncertainty,” he says. “But that also presents an opportunity to reposition assets and buy new, good-yielding assets for the long term.”
Joel Schlesinger is a Winnipeg-based freelance writer who has written for Canadian Family Offices since 2021. Specializing in investment, wealth advice, real estate and personal finance, he is also a regular columnist for the Winnipeg Free Press, and his work regularly appears in The Globe and Mail, Calgary Herald and Edmonton Journal.
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