The Caisse de dépôt et placement du Québec (CDPQ) has reported a 10.8% drop in the value of its real estate portfolio for 2024.

Although CDPQ posted a strong overall return of 9.4% across its total portfolio, real estate stood out as a major underperformer, according to the pension fund’s annual report released Thursday. The real estate portfolio’s dollar value declined by $5.1 billion.

Its five-year return suffered a $4.7-billion fall in value and a 2.2% annualized loss between 2019 and 2024.

“The year proved to be more difficult in real estate due to our longstanding exposure to the U.S. office sector, which faces persistent challenges,” wrote Jean St-Gelais, CDPQ’s board chair, in a letter to the pension fund’s investors included in the annual report.

In the U.S., remote work trends and rising vacancy rates continue to plague the office sector. These headwinds severely impacted CDPQ’s holdings, dragging down the performance of the broader real assets category.

In response to these persistent issues, CDPQ advanced its strategy to streamline and reposition its real estate operations. In January 2024, the pension-fund manager began to integrate its real estate subsidiaries, including Ivanhoé Cambridge and Otéra Capital, into its core organizational structure.

The integration, now “well underway,” aims to simplify operations, improve efficiency, and strengthen CDPQ’s leverage with investment partners said President and CEO Charles Emond in his letter to investors. Emond said the integration project is “progressing rapidly and already delivering benefits.”

“Acting as one organization gives us more traction with our partners and allows us to focus on our role as an investor,” he wrote.

While real estate stumbled, CDPQ’s infrastructure portfolio delivered a strong performance, helping to stabilize the broader real assets class. (The real assets class comprises the real estate and infrastructure portfolios.)

The infrastructure portfolio generated a 9.5% return in 2024 as its value rose $5.5 billion.

Infrastructure investments posted a five-year annualized return of 10%, achieving a $22.7-billion gain in value. Renewable energy, ports, and telecommunications led the gains, particularly in North America and the Asia-Pacific region.

Despite the hit to real estate, CDPQ remains confident in its long-term strategy and continues to pursue diversification and operational consolidation to weather future market volatility.

Geopolitical hotspots, extreme polarization and the global tariff war have created instability that is more likely than ever to cause profound economic shocks, Emond wrote. Tariff threats could prompt investors to reconsider their investments in Quebec, he added.

But CDPQ has vowed to take a proactive approach to the uncertainty.

“In this environment, the best strategy is to play
offence,” he wrote. “Whatever happens, we must seize this opportunity to
become more competitive and capitalize on our strengths.”

Photo: CDPQ

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