Navigating through real estate complexities.
La Caisse's Real Estate Struggles Amidst High Interest Rates and Market Uncertainties
In a challenging five-year period for the real estate market, the CEO of La Caisse, Charles Emond, has admitted that the sector has been difficult for the company. The current yield of buildings in La Caisse's portfolio stands at 2.1%, almost neutralized by high interest rates.
The real estate portfolio of La Caisse includes properties in the logistics and residential sectors, which have been exposed to industry uncertainties and American tariff waves. One of La Caisse's New York assets, located at 1211, Avenue of the Americas, was sold at a loss in January 2025.
However, La Caisse continues to transform Ivanhoé Cambridge, shifting from a property management model to an investor model. The global availability rate of office spaces in Manhattan is at its lowest since 2020, and there are encouraging signs for the office sector, particularly in the United States, with an increase in occupancy of major assets, such as in New York.
In Toronto, one of the two CIBC towers, in which La Caisse holds stakes, is fully leased. Despite the pivot, the real estate portfolio has underperformed over a longer period, with a return of 0.3% over five years, compared to a reference index of 0.4%.
La Caisse's annual report expresses confidence in the future performance of its real estate portfolio, with Charles Emond believing that the scenario for the real estate portfolio to outperform its reference index is still within reach. Warehouses in the logistics sector have performed well over the past five years, but they also bring challenges due to trade wars, according to La Caisse.
The building, which houses the American media outlet Fox News, was sold to the New York company RXR at a price reduced by 33% compared to its value at the time of acquisition. Despite the challenges, La Caisse remains optimistic about the future of its real estate portfolio, expecting it to outperform its reference index within 18 to 24 months, conditional on a stable market without significant interest rate drops or increases.
As of December 31, 2024, La Caisse's real estate portfolio represented 8.9% of its global portfolio, which holds stakes in over 1500 buildings in Quebec and around the world. New tenants are expected to confirm their entry into Place Ville-Marie soon, according to Charles Emond. Despite the recent setbacks, La Caisse's resilience in managing its real estate portfolio over five years is noteworthy.
- La Caisse is exploring opportunities in French financing, aiming to diversify its investments beyond real-estate, in response to the struggles in their real-estate sector.
- Despite difficulties in the real-estate market, especially in its logistics and residential sectors, Charles Emond remains optimistic about the future performance of La Caisse's real-estate portfolio, particularly in the United States office sector and warehouse investments in the logistics sector.
