REITS Poised to Thrive in 2017

Boston Properties, owner of 399 Park Ave. in Midtown Manhattan, is RBC’s top pick among REIT stocks for 2017.

CLEVELAND—Despite a rapid uptick in 10-year Treasury rates, REITs delivered “largely stable” performance in 2016, and RBC Capital Markets analysts are expecting another year of healthy returns in 2017. They’re anticipating that the MSCI US REIT index will close the year at 1,200, based on a total return of 8.5%.

RBC’s outlook is based on “a solid economic backdrop with GDP growth trending modestly higher at 2.3% compared to 1.6% for the first three quarters of 2016, and long-term interest rates moving higher,” according to the firm’s report. “We note GDP growth has accelerated throughout the year, and the new administration appears poised to implement more pro- growth policies compared to the current administration,” RBC’s analysts write. They assume an increase in yields on funds from operations of 10 basis points despite an expected 50-bp increase in interest rates.