Patrick Wilson, portfolio manager on the real estate securities team at CenterSquare Investment Management, told the REIT Report that reasonable demand, pockets of strength, and very low supply on the horizon should amount to “pretty healthy” earnings growth for REITs in the next 12-24 months.
The combination of higher interest rates suppressing development for most property sectors with the exception of data centers, alongside solid balance sheets, creates “a really good scenario and outlook for REITs today,” Wilson said. “I really do think we're in an attractive point in the cycle right now for listed real estate.”
In many ways the current K-shaped economy is playing out in favor of the REITs that cater to higher-end consumers versus the broader commercial real estate market as a whole, Wilson noted. He also pointed to increased M&A activity as evidence that scale, balance sheet strength, and access to lower-cost capital are becoming more important in a higher-rate environment.
Among sectors, Wilson is most positive on senior housing, data centers, and high-quality open-air shopping centers. Senior housing is benefiting from powerful demographic demand and limited supply, while established data center REITs are positioned to benefit from AI-driven enterprise adoption and increasingly valuable permitted, powered assets. As the “incumbent on the block” with large operating portfolios, data center REITs, he noted, could see their value increase as moratoriums make it harder to develop.
In life sciences and office, he sees selective recoveries concentrated in high-quality, well-located assets.
Wilson said current REIT market valuations show wide dispersion, creating opportunities for active managers, particularly around balance sheet analysis and refinancing risk. The central debate for listed real estate today, he added, is whether earnings growth can outpace pressure from higher interest rates, and how that might put pressure on valuations.