Investing.com — In its report titled “2025 World Actual Property Outlook,” RBC Capital Markets mentioned 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 S&P/TSX REIT index gaining simply 1% year-to-date in comparison with the MSCI U.S. REIT index’s 13% rise. Nonetheless, RBC sees a stronger 2025 setup for Canadian REITs, pushed by enticing valuations and anticipated financial coverage easing from the Financial institution of Canada (BoC).
“With most subsectors nonetheless positioned to ship respectable earnings development, valuations trying more and more interesting, and extra sizeable anticipated financial coverage easing by the BoC, we see assist for stronger CDN REIT returns in 2025,” RBC analysts led by Pammi Bir mentioned within the observe.
U.S. REITs, dealing with stretched valuations and protracted headwinds from rising bond yields, are projected to ship flat to barely optimistic complete returns subsequent yr, probably lagging the broader U.S. fairness market.
The sector-specific outlook underlines sturdy prospects for Canadian seniors housing, buoyed by accelerating demand and muted new provide.
RBC expects a median development of 11% in same-property (SP) web working earnings (NOI) for retirement houses in 2025, with web working earnings development for long-term care amenities anticipated to vary between 1% and a couple of%.”
In the meantime, Canadian industrial REITs are anticipated to learn from substantial mark-to-market alternatives, although near-term pressures embody rising availability charges and moderating demand.
Within the U.S., healthcare REITs stand out with a “wholesome working atmosphere and stable long-term outlook,” notably amongst these with important 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, similar to U.S. industrial and storage, are more likely to face continued strain into mid-2025 because of demand uncertainties.
RBC’s international REIT basket balances sector fundamentals, development prospects, and valuation.
Notable picks embody Dream Industrial REIT (TSX:DIR_u) (DIR), Boardwalk REIT (TSX:BEI_u) (BEI), and Chartwell Retirement Residences (TSX:CSH_u) (CSH) in Canada, alongside U.S.-based Gaming & Leisure Properties (NASDAQ:GLPI) and Healthpeak Properties (NYSE:DOC).
American Healthcare REIT Inc (NYSE:AHR) (AHR) is highlighted as among the many picks with “the very best development prospects not solely within the sector but in addition the business in our view,” analysts mentioned.
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.
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