The Caisse de dépôt et placement du Québec (CDPQ) saw its real estate portfolio returns decline during the first half as high interest rates and the struggling U.S. office market exacted a toll.

The portfolio posted a minus-0.3% return compared with an index portfolio’s 0.9% drop.

Montreal-based CDPQ said its portfolio was affected by the real estate industry’s persistent challenges experienced in recent years, particularly the high interest-rate environment and the U.S. office sector’s troubles.

“The logistics sector contributed positively to the return, but could not fully mitigate the fall in value in the office sector, especially in the United States,” said CDPQ in its latest quarterly report.

Over the past five years, the portfolio has posted a minus-3% return, below the index’s 9% loss.

“Since the portfolio’s repositioning toward sectors of the future such as logistics and residential in 2020, the gap between the returns of the portfolio and the index has narrowed,” said CDPQ.

On the other hand, the pension fund operator’s infrastructure portfolio has fared much better, posting a 5.3% return in the first half of 2024 and a 10.2% annualized return over the past 10 years.

While the real estate portfolio struggled, CDPQ’s overall portfolio posted a 4.2% during a first half.

“Discipline is in order going forward, as the second half of the year has already seen its share of twists and volatility,” said Charles Eamond, CDPQ’s president and CEO.

Photo: CDPQ