Timbercreek Asset Management released its 2017 Market Outlook, which identifies key trends the firm sees playing out for global real estate securities in the year ahead. Overall, the report predicts strong performance across regions, including Canada and the United States, with the firm forecasting that global REITs are priced to deliver total returns in the range of 8.5 per cent and 10.5 per cent.
“Global real estate is well positioned to experience another year of growing demand and modest supply, which combined with attractive public market valuations should lead to positive total returns in 2017,” stated Corrado Russo, Senior Managing Director, Investments, Global Head of Securities, Timbercreek Asset Management.
Notably, the report predicts that the national apartment market will remain attractive, with asset values continuing to be supported by immigration, limited new supply and deterrents to home ownership, including high prices for single-family homes and stronger mortgage rules.
With regards to the U.S. market, Mr. Russo said, “President-elect Trump’s campaign promises, including his agenda of lower corporate and personal taxes, higher infrastructure and defense spending and less financial regulation have the potential to result in a significant increase in fiscal stimulus. If implemented effectively, this could lead to renewed economic growth in U.S. GDP, more jobs and better longer-term productivity.”
Furthermore, the report predicts a bullish outlook for the U.S., based on the following considerations:
- Trump’s combined policies, should they be implemented, could lead to stronger economic growth, with the hotel sector realizing the largest benefit. There is a strong historical correlation between GDP growth, corporate profits and REVPAR (Revenue per Available Room) growth. Although lodging supply is anticipated to be greater than demand in 2017, this is already reflected in stock prices.
- The potential for lower taxes and increased employment should have positive implications for consumer sentiment and spending, benefiting industrial real estate fundamentals driven by greater demand for space by e-commerce tenants as online sales continue to capture greater market share. Timbercreek also sees increased spending benefiting bricks-and-mortar shopping centres and regional malls.
- Higher infrastructure spending should drive up construction labor costs and increase building costs on commercial real estate. Further, higher inflation could stymie new supply, while lower supply and higher replacement costs are ultimately a positive for existing real estate assets.
“All in all, we believe global real estate fundamentals are strong, with global REITs trading at a discount to NAV and providing an attractive dividend yield that is fully covered, stable and growing”, Mr. Russo concluded.
To view the report, please visit: http://www.timbercreek.com/quick-links/white-papers/