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BMO Capital Markets

October 14, 2015 09:10 ET

Investors See REITs Outperforming S&P 500 Over Next Year - BMO Capital Markets Poll

- Nearly half of investors say REITs will outperform the S&P 500 by 3 per cent or more

- More than half of investors see residential sector as top performer among REITs over next 12 months

NEW YORK, NEW YORK and TORONTO, ONTARIO--(Marketwired - Oct. 14, 2015) - Real Estate Investment Trusts, or REITs, are predicted to outperform the S&P 500 Index over the next 12 months, according to a poll of industry participants who attended the BMO Capital Markets 10th Annual North American Real Estate Conference in Chicago.

The poll, which solicited the input of 97 real estate industry leaders, revealed that 45 percent of investors expected REITs to outperform the S&P 500 Index by more than three percent in the next year; 35 percent said it could outperform it by as much as 10 percent.

Last year at this time, only 13 percent of respondents predicted the asset class to outperform the S&P.

Poll respondents expect the better performance to come in part as mainstream investors become more interested in the sector. It is poised to receive its own sector classification in the major market indices in the Fall of 2016.

"Corporate and investor attendees alike expect the flow of funds from mainstream investors to increase, albeit marginally, as a result of real estate obtaining its own GICS (Global Industry Classification Standard)," said Paul Adornato, analyst for BMO Capital Markets and a conference co-host.

Sixty-five percent of poll respondents said the new classification will help REITs draw more interest from mainstream investors. Presently, REITs are grouped under Financials.

Further, the poll found 52 percent of respondents expect residential real estate to be the best performing subsector among REITs in 2015. An overwhelming majority of respondents (84 percent) are expecting a rise in U.S. 10-year treasury yields over the next 12 months.

"BMO's outlook on the space is positive, despite the prospects of higher interest rates," said John Kim, a REITs analyst with BMO Capital Markets who was also a co-host of the conference in Chicago. "Rising rates are already expected in the market, resulting in wide disparities between public and private market valuations, which we do not believe are sustainable over the long-term."

The poll was administered via an app at BMO's two-day Real Estate Conference.

About BMO Capital Markets

BMO Capital Markets is a leading, full-service North American financial services provider. With more than 2,300 employees operating in 29 locations, including 16 in North America, BMO Capital Markets offers corporate, institutional and government clients access to a complete range of investment and corporate banking products and services. BMO Capital Markets is a member of BMO Financial Group (NYSE:BMO)(TSX:BMO), one of the largest diversified financial services providers in North America, with total assets of CDN$672 billion as of July 31, 2015, and more than 47,000 employees.

To view a copy of the research report on the BMO Real Estate Conference and poll, or to request an interview with John Kim or Paul Adornato, please see contact information below.

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