Scotiabank real estate analyst Mario Saric sees the economic recovery as beneficial for the REIT sector despite a higher interest rate environment,
“We reaffirm our view of the economy as a REIT friend, not foe, and the macro outlook supports REIT outperformance vs. TSX in 2021… Rising real rates, inflation, and economic growth?...Yes, please! Our analysis since 1972 and 1995 shows REITs beating the Index on accelerating GDP growth, accelerating inflation, and rising real interest rates; the out-performance is greater than when those factors are falling … We think Apartments, Industrials, and Self-Storage could benefit on a transition to Growth, with upside NAVPU [net asset value per unit] growth on lower cap rates. Most of our top picks screen well on NAVPU Growth, the biggest driver of [long term] REIT returns. Top Growth picks = IIP, MHC, NWH, SMU and SVI. Top Value picks = AP, CSH, DIR and ERE. Both Value & Growth = BAM, GRT and TCN. Top Yield Picks = APR and NWH.”