Global Real Estate Investment Trusts (REITs) are forecast to deliver returns of between 8% and 10%, according to a report published Thursday from Toronto-based Timbercreek Investment Management Inc.
“We anticipate that this year’s market conditions will be favourable for global real estate securities as valuations remain attractive, both on an absolute and a relative basis, with global REITs trading below the 10-year global equities average — levels not seen since 2008-2009,” says Corrado Russo, senior managing director, investments and global head of securities, Timbercreek, in a statement. “These factors, when combined with projected dividend growth should positively influence global REIT share prices in 2018.”
The report, which identifies key trends in the year ahead, predicts strong performance across many markets including Canada and the United States.
In Canada, the outlook remains positive, particularly for REITs that own office and retail assets with infill development opportunity in urban areas such as Toronto, Montreal and Vancouver.
Timbercreek says Canadian small cap REITs and REITs that own assets internationally (in Europe or the U.S.) are fundamentally mispriced and poised to deliver better than average returns in 2018.
The report also predicts a positive outlook for the U.S., based on four sectors:
> technology is a top investment opportunity for 2018 as data centres continue to gain momentum which should drive up market rents and increase the demand.
> high-quality retail centres in strong locations and non-discretionary grocery-anchored shopping centres that are trading at discounts present opportunities to earn attractive dividend yields and generate outsized total returns.
> lodging is poised to benefit from an improving economy and corporate tax that has the potential to loosen travel budgets which have been reined-in since the financial crisis
> single-family rentals are expected to experience strong cyclical growth opportunities to earn above average total returns in 2018, in part due to a tax reform plan that penalizes home ownership in high tax markets.
Read the full report.