Dream Industrial Real Estate Invest Trst (TSE:DIR.UN) management highlighted what it described as resilient operating and financial performance in 2025, pointing to higher rents on renewals, steady occupancy, and increasing contributions from ancillary revenue initiatives. Executives also discussed significant capital recycling activity, including the formation of a new Canadian joint venture with CPP Investments, and provided guidance for 2026.
2025 results and portfolio performance
Chief Executive Officer Alexander Sannikov said 2025 was marked by “significant volatility and unprecedented changes to the global trade environment,” but noted the REIT delivered diluted funds from operations (FFO) per unit of CAD 1.05, up about 5% year over year. He added that average in-place rents increased 8%, driving Comparative Properties net operating income (NOI) growth of roughly 6% for the full year.
Management said the REIT signed over 10 million square feet of leases during 2025 at 30% spreads, including 1.2 million square feet of development leasing. The REIT ended the year with 96.2% in-place and committed occupancy, and a tenant retention ratio of about 70%. Sannikov said there remains “significant mark-to-market opportunity” over the next two to three years, especially in Canada, and management expects market rent growth to resume in the second half of 2026 and into 2027 after more than two years of muted market rent development.
Leasing trends across Canada and Europe
Recently appointed Chief Operating Officer Gord Wadley said the Canadian industrial leasing market stabilized during the fourth quarter, citing 6 million square feet of net absorption—described as the strongest pace in the last 12 quarters. Wadley said the supply pipeline is shrinking and shifting toward more build-to-suit developments, improving the outlook for fundamentals in most of the REIT’s regions.
Wadley said that since the beginning of October, the REIT completed more than 2.1 million square feet of leasing at an average rental spread of 14.3%, bringing year-to-date leasing to 7.4 million square feet at an average spread of 19.6%.
- Greater Toronto Area: Wadley said the GTA led the country in absorption and leasing momentum. The platform completed approximately 2.5 million square feet of leasing in 2025, including about 610,000 square feet in the fourth quarter at a 58% rental rate spread.
- Quebec: Management pointed to modest occupancy gains from leasing smaller vacancies, while elevated sublease availability and excess large-bay inventory pushed overall vacancy to just under 6%. Wadley highlighted a 366,000-square-foot asset in Laval where the REIT regeared the building to market rents, with starting rates of CAD 13–CAD 14 and average annual escalations of 3%, producing spreads of more than 70% versus prior rents.
- Western Canada: Wadley said leasing remained “very strong,” with more than 800,000 square feet transacted in the fourth quarter. He said two Calgary developments—Balzac 20 and Balzac 50—are now 100% leased and are expected to contribute more than CAD 10 million of annual NOI. In response to an analyst question, he said very limited NOI from these projects was included in fourth-quarter results and that the run rate should build through 2026, with more impact in the second half.
- Europe: Wadley said leasing has been less impacted by tariffs and that demand drivers such as defense and nearshoring are becoming more prominent. He said availability has stabilized in the low- to mid-single-digit range and is trending downward. Management said it has addressed more than 40% of 2026 expiries to date and has signed or advanced negotiations on more than 1.3 million square feet since the start of 2026.
Capital recycling, joint ventures, and balance sheet updates
Sannikov said the REIT completed or firmed up more than CAD 850 million of dispositions at premiums to IFRS values during the year, including the formation of the DCI joint venture with CPP Investments. He said the first tranche of a recapitalization of a 3.6 million-square-foot portfolio closed in early February and is expected to result in net proceeds of about CAD 375 million.
Quan said DBRS upgraded the REIT’s credit rating to BBB high with stable trends, and management subsequently secured interest rate savings on corporate unsecured bank facilities, representing approximately CAD 0.005 in FFO per unit this year. The REIT ended 2025 with leverage in its target range and a net debt-to-EBITDA ratio of 7.9x, according to Quan, and repaid most of the credit facility balance after the February closing of the first tranche of DCI asset sales.
Management said it suspended its distribution reinvestment plan (DRIP) at the end of 2025. Through the prior Friday in 2026, the REIT repurchased 2.4 million units at a weighted average price of CAD 13.08, totaling CAD 32 million under its normal course issuer bid (NCIB).
2026 outlook: occupancy, NOI growth, and FFO guidance
Quan guided to stable average in-place occupancy in the high 94% to low 96% range in 2026. For Comparative Properties NOI, management said first-half growth is expected to be consistent with the fourth-quarter 2025 growth rate, while full-year 2026 Comparative Properties NOI growth is expected to be stronger than full-year 2025, depending on leasing timing.
Management said proceeds from the initial DCI portfolio sale are expected to be deployed over the next few quarters, weighted toward the second and third quarters. As that occurs, average leverage is forecast in the low- to mid-7x debt-to-EBITDA range—about one turn lower than year-end on a run-rate basis—according to Quan. The REIT expects first-quarter FFO per unit to be slightly lower than the fourth quarter as deployment ramps.
For 2026, Dream Industrial issued an FFO per unit outlook of CAD 1.08 to CAD 1.10, noting the outlook is based on current foreign exchange rates and interest rate expectations. In the Q&A, management said it expects to have proceeds fully deployed by the end of the year, with a stronger run rate into year-end and 2027.
Market rent growth expectations and defense-related demand
Executives said market rent growth is already occurring in Western Canada and is expected to continue, while Toronto and Montreal could see rental growth resume in the second half of 2026, led by tighter small- and mid-bay segments. Sannikov said management is watching absorption, availability rates, and sublease availability as indicators that could support a broader recovery in rent growth.
Management also discussed emerging defense-related demand drivers. While noting the REIT is not primarily focused on manufacturing, executives said its infill mid-bay assets are flexible and can support last-mile distribution and light industrial uses. Sannikov said the REIT is seeing a slight uptick in user acquisition activity connected to defense needs and described defense-related occupancy across the managed portfolio as “meaningful,” though the REIT has not disclosed the related square footage.
About Dream Industrial Real Estate Invest Trst (TSE:DIR.UN)
Dream Industrial Real Estate Investment Trust is an unincorporated, open-ended real estate investment trust. Its portfolio comprises industrial properties located in key markets across Canada and the U.S. Its objective is to build upon and grow its portfolio and to provide stable and sustainable cash distributions to its unitholders. Geographically the business is organized into Ontario, Quebec, Western Canada, Europe and the USA. Substantial revenue is derived from the Canadian portfolio.
