Canadian REIT ETFs: The Good, The Bad, and The Ugly

As part of what I do for work, all sorts of ETFs come across my radar. Some are genuinely well-designed: built with investors in mind, priced fairly, and serving a clear purpose within a portfolio.

Others, not so much. Some ETFs charge excessive fees for passive exposure, track narrow or poorly constructed benchmarks, or simply exist to chase a fleeting trend. The result is a lot of noise, and for investors trying to make sense of it all, not every fund deserves a spot in their portfolio.

So, for this roundup, I’m keeping things focused. In line with my recent MoneySense column on REIT investing in Canada, this time I’m taking a closer look at Canadian REIT ETFs—what’s good, what’s not, and what still makes sense heading into 2025.

Canadian REIT ETFs: The Good

The gold standard for Canadian REIT exposure, in my view, is the Global X Equal Weight Canadian REITs Index ETF (REIT). I genuinely do not understand why it has only $2.7 million in assets because it delivers exactly what most investors should want in this space.

It equally weights the major Canadian REITs using the proprietary Mirae Asset Equal Weight Canadian REITs Index. Equal weighting matters in a narrow sector like Canadian real estate because market-cap-weighted benchmarks lean heavily on a few large issuers and end up with meaningful concentration risk.

Costs are another major advantage. The base management fee is already low at 0.25%. Global X is also rebating it to zero until December 31, 2025. That makes REIT the cheapest pure-play Canadian REIT ETF available as of today.

The closest competitor is the BMO Equal Weight REITs Index ETF (ZRE), which tracks a very similar Solactive equal weight index but charges a 0.61% MER. That is expensive for a simple rules-based strategy.

I also like the Vanguard FTSE Canadian Capped REIT Index ETF (VRE). Before REIT launched, VRE was the low-cost option at a 0.39% MER. The benchmark is not a pure REIT index because it includes two real estate operating companies, but VRE still holds up well compared with the rest of the market.

Canadian REIT ETFs: The Bad

The iShares S&P/TSX Capped REIT Index ETF (XRE) is an example of what can happen when many investors default to the biggest brand name without looking deeper.

On the surface, XRE looks fine. It tracks the S&P/TSX Capped REIT Index and pays a healthy 5.36% trailing 12-month yield. The problems start when you look at concentration and fees.

The benchmark is market-cap weighted, which results in a top-heavy portfolio. CAPREIT, RioCan, and Granite collectively make up more than 30% of the entire ETF. Equal weight products like REIT and ZRE avoid this issue.

The second issue is cost. XRE still charges a 0.60% MER. That may have been competitive when the fund launched in 2002. It is not competitive in 2025. The fee drag has been significant. Over the last ten years, XRE returned 5.05% annualized, while its index returned 5.68%. Most of that gap comes from fees.

Canadian REIT ETFs: The Ugly

I want to like the Middlefield Real Estate Dividend ETF (MREL). In a narrow segment like Canadian REITs, active management can add value, and MREL has the flexibility to invest outside the benchmark. It currently has about 19% in U.S. REITs, which adds useful diversification. It also pays a generous monthly distribution of $0.075 per unit, which works out to a 7.13% yield.

However, liquidity is weak. ETF liquidity depends on the underlying holdings, and Canadian REITs are not especially illiquid. Yet on November 17 I saw a bid of $12.52 and an ask of $12.60, which works out to a spread of roughly 0.64%. Middlefield also disclosed that the average bid-ask spread for the twelve months ending February 28 was 0.76%. That is extremely wide for a long-only equity ETF.

The second issue is cost. The management fee is 0.75%, which is already high. The actual MER is not published on the main webpage. You need to download the ETF Facts document to find it. As of April 2025, the MER was 1.21%. That level of cost is normally seen in complex alternative strategies, not a standard long-only REIT ETF.

This combination of high spreads and high fees is a major hurdle, even if the active strategy has potential upside. For this reason, I’m not a fan of MREL, notwithstanding its decent historical performance.