Equiton's focus on purpose-built rental housing offers a disciplined approach to diversification and long-term returns
This article was produced in partnership with Equiton.
Optimism in the private and public markets is set to soar in 2025, buoyed by falling interest rates and investor confidence. It’s tempting to assume that the coming year will deliver another win for stock investors, but the landscape is far from risk-free. Market uncertainties and potential volatility could challenge even the most experienced investors, making diversification more important than ever.
In 2024, North American equity markets were led by a small cast of high-flying stocks, fuelling concerns about the continued sustainability of their growth. Far from stocks’ inherent volatility, certain real estate investments, especially those in the private multifamily, industrial and select niche segments, offered investors stable, income-generating opportunities. Within the multifamily category, purpose-built rental housing owes its strength to the enduring demand for affordable living options, driving consistent cash flow. “With rising demand and carefully managed investments, private real estate offers a stable and strategic way to diversify in 2025,” says Geoff Lang, SVP of Business Development at Equiton.
From volatility to stability: Why 2025 calls for diversification
The projected growth in earnings across equity markets offers a broadly supportive backdrop for investors. However, as some more speculative assets in tech and artificial intelligence continue to inflate North American indexes, many are adopting a more selective approach, focusing on regions and sectors where growth prospects align with sustainable value. Real estate, and particularly income-generating assets such as multifamily housing, provides an attractive diversification strategy.
Purpose-built rentals are uniquely positioned to continue to thrive in 2025. Despite the hurdles, the Canada Mortgage and Housing Corporation (CMHC) expects rental markets to remain tight due to unrelenting demand. The slowing pace of condo development and absorption adds another dimension to this opportunity. With CMHC projecting tight rental markets and slowing condo development further reducing housing supply, purpose-built rentals are positioned to fill the gap, providing investors with a compelling opportunity to address unmet demand.
Meeting demand with strategy
Companies like Equiton are taking a strategic approach, focusing on the long-term potential of purpose-built rentals. Lang explains that the company’s conservative acquisition and financing strategies are critical to its success. “We lock in our interest rates on 10-year fixed mortgages,” Lang says. “It’s not the flashy move, but it’s the prudent one. This gives us the stability we need to grow confidently, even in markets like the one we just emerged from.”
Financing hurdles and high construction costs make it difficult for many developers to break ground on new projects. For companies with a longer-term outlook, however, the opportunity to produce purpose-built housing remains viable, particularly in markets where tenant demand is strong and regulatory frameworks are favourable.
"Developing rental housing is a marathon, not a sprint," Lang explains. "It’s about being selective —choosing locations with strong fundamentals and navigating regulatory challenges like rent control with a clear-eyed strategy."
Equiton currently has a three-tower rental project underway in Ottawa, where the rental market has long been supported by high occupancy rates, low supply, and a preference for urban living. The project’s first tower is expected to launch in mid-2025.
Equiton is also capitalizing on opportunities to strengthen its existing portfolio. Properties with significant rent gaps to market — the difference between current rents and prevailing market rates — represent opportunities to unlock value through organic tenant turnover and targeted renovations.
“Our average rent is about 30% below market,” Lang notes. “As we turn over units, we close that gap. It’s a key driver of our net operating income and a differentiator in how we approach growth. Just as important, every improvement enhances quality and livability for our residents. It’s a win-win.”
Looking ahead: building on trust
While optimism surrounds 2025’s investment outlook, the year will be shaped by several factors. Global economic interconnectedness means U.S. public markets — and by extension, Canadian markets— are increasingly sensitive to a range of factors, including domestic inflation, interest rate trends, technological innovation, and rising geopolitical tensions. Though many expect a steady decline in inflation and incremental rate cuts, risks like stagflation and slowing global growth remain on the horizon.
Real estate, particularly purpose-built rental housing, offers a reliable alternative. Its ability to generate stable cash flow and align with long-term housing demand makes it a compelling option for investors navigating market volatility. Equiton’s disciplined approach — anchored by strategic acquisitions, thoughtful financing, and value creation through rent gap opportunities — demonstrates how the sector can thrive even amid broader economic challenges.
“We say what we do and do what we say,” Lang emphasizes. “That reliability has been key to our success since 2015. Investors know we’re not going to chase trends or take unnecessary risks. It’s about delivering stable, long-term returns, no matter what the market throws at us,” says Lang.
