Report: Global REITs Expected to Deliver 9-10% Returns

TORONTO—Timbercreek Investment Management Inc. has released its 2019 Market Outlook, which identifies key trends the firm anticipates for global real estate securities in the year ahead. Overall, the report forecasts attractive performance across many markets, including Canada, the United States and Europe.

“While we are cognizant of the fact that the global growth trajectory is changing, we believe this sets the stage for REITs to outperform broad equities by generating an attractive total return balanced between yield and growth,” stated Corrado Russo, senior managing director, investments and global head of securities, Timbercreek. “REITs and their more predictable recurring income streams have proven to be a powerful solution in slowing GDP environments.”

Within the Canadian real estate sector, the report notes the following:

  • Industrial REITs will benefit from e-commerce growing to represent a higher percentage of total retail sales in the coming years.
  • Timbercreek is also enthusiastic about the outlook for Canada’s senior housing sector in 2019, with strong demographics creating outsized demand growth in this sector.

The report also highlights a positive overall outlook for the U.S., based on the following considerations:

  • The world of real estate and technology is converging to create a strong secular growth story for data centers, representing one of the best investment opportunities in 2019.
  • In the more traditional real estate space, multi-family and single-family rental markets are poised to benefit from a slowing for-sale housing market.
  • Triple net lease REITs focused on owning gaming properties offer attractive external growth potential and high cash-on-cash returns.

Highlights—Other Markets:

  • Continental Europe: Urbanization, sustainable cash flows and specialty themes with low correlations to the broader market offer the best risk-adjusted investment opportunities for 2019. Multi-family residential markets in Germany and Ireland offer a compelling opportunity to earn outsized returns while the fallout from Brexit should enhance the appeal and demand for office markets in places like Belgium and the Netherlands.
  • Japan: Timbercreek believes that small- to medium-sized Grade B office buildings located in Tokyo are well positioned to experience further rental growth driven by a record-low unemployment rate, steady economic growth and strong property fundamentals.
  • Hong Kong: Entering 2019, Timbercreek favours companies that own office buildings in decentralized areas of Hong Kong.
  • Singapore: Singaporean-based data centers offer an attractive opportunity to earn outsized returns with secular growth characteristics.
  • Australia: Non-discretionary retail shopping centers offer a compelling opportunity to generate above average dividend yields supported by resilient cash flow.

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