A study out of the University of Florida, finds that across several countries (including Canada), levered public market real estate returns were significantly higher and more volatile than unlevered returns over a 2002-2011 sample period. Researchers also found that
"..increased leverage during the 2007-2008 REIT crisis was correlated with larger declines"
(David C. Ling, Andy Naranjo, and Emanuela Giacomini, Leverage and Returns: A Cross-Country Analysis of Public Real Estate Markets).
This is not surprising. Leverage is a risk multiplier that magnifies returns in both directions. This is why it is important to make long term real estate investment decisions based on unlevered return expectations, especially in higher risk real estate investments such as new commercial development. It is critical that the projections indicate that your unlevered return on investment, meets your required return needs. Don't get influenced by the financial engineering of leverage structures that prove to be volatile.