Investing.com — In its report titled “2025 World Outlook,” RBC Capital Markets stated it anticipates diverging paths for Canadian (CDN) and U.S. REITs in 2025, underpinned by valuation dynamics, financial coverage shifts, and sector-specific fundamentals.
Canadian REITs underperformed their U.S. counterparts in 2024, with the index gaining simply 1% year-to-date in comparison with the index’s 13% rise. Nonetheless, RBC sees a stronger 2025 setup for Canadian REITs, pushed by engaging valuations and anticipated financial coverage easing from the Financial institution of Canada (BoC).
“With most subsectors nonetheless positioned to ship first rate earnings development, valuations trying more and more interesting, and extra sizeable anticipated financial coverage easing by the BoC, we see help for stronger CDN REIT returns in 2025,” RBC analysts led by Pammi Bir stated within the word.
U.S. REITs, dealing with stretched valuations and protracted headwinds from rising bond yields, are projected to ship flat to barely constructive complete returns subsequent 12 months, probably lagging the broader U.S. fairness market.
The sector-specific outlook underlines strong prospects for Canadian seniors housing, buoyed by accelerating demand and muted new provide.
RBC expects a mean development of 11% in same-property (SP) web working earnings (NOI) for retirement properties in 2025, with web working earnings development for long-term care services anticipated to vary between 1% and a pair of%.”
In the meantime, Canadian industrial REITs are anticipated to profit from substantial mark-to-market alternatives, although near-term pressures embrace rising availability charges and moderating demand.
Within the U.S., healthcare REITs stand out with a “wholesome working atmosphere and strong long-term outlook,” notably amongst these with vital SHOP portfolios.
On the similar time, web lease REITs are poised for acquisition quantity development as capital prices enhance, however efficiency will stay tied to yield curve actions.
Different subsectors, reminiscent of U.S. industrial and storage, are prone to face continued stress into mid-2025 resulting from demand uncertainties.
RBC’s international REIT basket balances sector fundamentals, development prospects, and valuation.
Notable picks embrace Dream Industrial REIT (TSX:) (DIR), Boardwalk REIT (TSX:) (BEI), and Chartwell Retirement Residences (TSX:) (CSH) in Canada, alongside U.S.-based Gaming & Leisure Properties (NASDAQ:) and Healthpeak Properties (NYSE:).
American Healthcare REIT Inc (NYSE:) (AHR) is highlighted as among the many picks with “the perfect development prospects not solely within the sector but additionally the business in our view,” analysts stated.
The report additionally cautions about challenges in Canadian workplace markets, the place leasing velocity stays sluggish, and U.S. manufactured housing, which grapples with inventory choice difficulties regardless of favorable fundamentals.
