Scotiabank Scotiabank real estate analysts Mario Saric and Himanshu Gupta discussed the results of a recent survey of major institutional lenders in the sector,
“Lending sentiment gaining some traction: Target CRE loan book growth = 16% (vs 13% last year) with more lenders looking to increase allocations. Lenders expect flat mortgage spreads in 2024, despite huge base rate uptick y/y. Apartments make it 5-for-5 as the most popular again (five years in a row), with Industrial retaking the #2 spot. Office lender sentiment is by far the lowest and getting worse. In contrast, Seniors Housing saw the highest y/y uptick in lender sentiment. Fewer lenders are concerned with Enclosed Malls. Overall, we believe the results support our preferred asset classes heading into 2024, namely Senior Housing, Apartments, and Industrial. We still believe REITs are a levered economic play, requiring lower Corporate BBB bond yields for outsized gains. Softish landing = 20%+ return upside; Hard landing = ~10% downside”
The analysts have “sector outperform” ratings on CAP REIT, Interrent REIT, Dream Residential REIT , Tricon Residential Inc., Choice Properties REIT, Crombie REIT, CT REIT, RioCan REIT, Allied Properties REIT, Dream Industrial REIT, Granite REIT, Chartwell Retirement Residences, and StorageVault.