BMO BMO analyst Michael Markidis emphasized the benefits of weaker U.S. inflation on Canadian REITs,
“The soft US CPI reading on Thursday was a significant catalyst for the listed-property sector. For the week ended July 12, the S&P/TSX Capped REIT Index was +4.7%, notably higher than other rate-sensitive asset classes (utilities, banks, and telecos were +3.8%, +2.8%, and +2.0%) and the Composite Index (+2.8%). Strength was broad based. Each of the 16 index constituents was in the positive territory; 4 were up by >6% (NWH, AP, GRT, and CT). Key releases on tap for this week include the BoC’s Business Outlook and Consumer Expectations Surveys (July 15) and Canadian CPI for June 2024 (July 16) … Per CBRE, office conversions totaling 6msf have commenced in Canada since 2021. Redevelopment into residential comprises the majority (61%); the project list includes industrial (15%), education (7%), hotel (5%), life sciences (4%), and other (8%) uses. Calgary introduced programs to incentivize the conversion of vacant office space in its downtown core in 2021. The total pipeline includes 17 projects (13 active, 4 under review). More recently, the municipalities of London and Ottawa have rolled out incentives and/or new processes to facilitate conversions”
Mr. Markidis has “outperform” ratings on Granite REIT, Dream Industrial REIT, Flagship Communities REIT, Canadian Apartment Properties REIT, Boardwalk REIT, Killam Apartment REIT, InteRrent REIT, Minto Apartment REIT, Crombie REIT, BSR REIT, First Capital REIT and Choice Properties REIT.