After a volatile year for many asset classes, real estate investment trusts – or REITs – are back in the spotlight. REITs, which invest in income-producing real estate, such as shopping malls, housing estates and hospitals, had a generally positive earnings season last quarter, and analysts say some will remain resilient even in a downturn. recession. “We view REIT second-quarter earnings as attractive,” the Wells Fargo Investment Institute said in a note last week. “Despite a relatively challenging quarter, real estate investment trusts (REITs) were able to generate attractive growth in funds from operations per share and comparable property net operating income.” He noted that the REIT sector saw growth in funds from transactions per share — a key earnings measure used by REITs — of 14.2% from the same period a year earlier. Technology REITs Looking ahead, Wolfe Research pointed out that technology REITs, focused on data centers and cell towers, could be particularly resilient in a tough economic environment. “Technology REITs (to their advantage in an economic downturn) tend to have rental growth that does not coincide with broader economic growth,” Wolfe Research analysts wrote in a recent note. Citi in a Sept. 9 report said it was overweight data center REITs. He pointed to Equinix Reit and Digital Realty Trust as trusts to watch, saying growing interest in “hybrid cloud” infrastructure – a combination of public and private clouds – should support further IT outsourcing. He was also bullish on cell tower REITs, highlighting American Tower REIT and SBA Communications REIT in particular. The bank said the tower’s business model remains well positioned to grow with continued investment from mobile operators. Healthcare REITs Meanwhile, Morgan Stanley noted in a recent report that healthcare REITs had outperformed the overall market this year, down 7% year-to-date to the end of the month. ‘august. By comparison, the MSCI US REIT index fell 18% over the same period, and the S&P 500 lost about 17%. “Given demographic tailwinds, significant room for a recovery in occupancy to pre-Covid levels, emerging pricing power and limited new supply, we believe the outperformance can continue. “, said the investment bank. He said senior housing was the most optimistic, given the 70 million baby boomers between the ages of 58 and 76 who made up 21% of the US population last year. The bank cited OECD projections that the U.S. cohort aged 75 and over will grow to about 34 million by 2030, from 24 million in 2021. Housing over the rest of the decade could be strongest we’ve ever seen,” Morgan Stanley analysts wrote. The bank picked Welltower, a senior housing REIT, giving it a price target of $90 — a potential upside of around 16%. “WELL has the greatest exposure to senior housing, the highest occupancy upside potential and the greatest certainty of execution,” Morgan Stanley said.If a recession materializes, the bank noted that at the time of the global financial crisis, Welltower occupancy “decreased modestly” in 2009 and was flat in 2010.” – CNBC’s Jasmin Suknanan contributed to this report.
REITs that appear resilient in recession, analysts say