A big chunk of Canada’s real estate investment world has quietly moved into defense mode. Funds managing roughly $30 billion including names like Centurion Apartment REIT and Trez Capital have been gating redemptions for the past couple of years. In plain terms, investors can’t get their money out on demand anymore. Not because managers want to trap capital, but because the market underneath them stopped cooperating.

The root cause isn’t mysterious. Rate hikes in 2022 and 2023 crushed the math. Borrowing costs jumped, transaction volumes dried up, and prices rolled over roughly an 18% drop from peak levels. At the same time, commercial real estate investment is down more than 20%, development pipelines have stalled, and construction loans..once treated as short duration and liquid are now anything but.

Why Gates Are Legal And Why They’re Being Used

These funds aren’t breaking rules. Their documents explicitly allow gates during periods of stress, and regulators permit it for a reason. If redemptions were honored in full right now, managers would be forced to dump properties or loans into a weak market, locking in losses for everyone who stays. Gating is meant to slow that process, spread the pain more evenly, and avoid fire sale dynamics.

This is less about protecting managers and more about preventing a classic liquidity mismatch from blowing up. Long dated, rate sensitive assets funded by investors who suddenly want cash don’t coexist peacefully when prices are falling.

The Deeper Problem Beneath The Surface

The uncomfortable part is what this signals about confidence. Nearly 40% of Canada’s private real estate fund market is now gated. That changes investor psychology. Capital gets cautious. New inflows slow. Recovery takes longer..especially for housing supply, which already depends heavily on continuous financing.

Funds are staring down a familiar spiral..redemptions force sales, sales push prices lower, lower prices hit NAVs, leverage ratios rise, lenders tighten, and suddenly a liquidity problem becomes a solvency conversation. In debt heavy real estate structures, that shift can happen faster than most expect.

The gates aren’t the crisis. They’re the tell. They’re a sign the system is under strain, and managers are buying time in a market that no longer forgives leverage, duration, or optimistic exit assumptions.