Scotiabank analyst Himanshu Gupta reports on the industrial REIT sector and let’s hope it’s not an indicator for the broader economy (my emphasis),
“Negative. CBRE released Q2/24 CDN industrial market stats yesterday ... Q2 industrial absorption was disappointing at -5M sf, suggesting a meaningful demand pullback. Last time we saw this level of negative absorption in Canada was during the GFC (Q1/09 to Q3/09). Supply side has moderated, but we need to see some recovery in leasing volumes. Assuming a H1/25 demand recovery (not H2/24 anymore), we see national availability rate peaking in Q4/24, and then slowly improving through 2025/26. Update on Valuation: Valuation looks inexpensive but market waiting for inflection point on fundamentals. Industrial REITs continue to trade in line with REIT sector since Oct’23, as entire premium valuation has eroded, both on P/NAV and P/AFFO basis … We maintain SO ratings on both GRT [Granite REIT] and DIR [Dream Industrial REIT], as our NAV’s are well-supported by still-strong private market asset pricing”