"As compared to prior years, we believe there will be mostly stable rates at the same time as an acceleration in fundamentals and solid fundamentals could persist and strengthen given the dearth of new supply for the next few years," Citi analyst Nick Joseph wrote in a note last week.
"Overall, we believe the 2025 backdrop is positive for REIT fundamentals," he wrote, noting that the bank's economic team expects healthy gross-domestic-product growth. "Supply is forecast to be lower in '25 with potentially historic lows in '26," Spector added.
Bank of America is also bullish on REITs, noting that the stocks are trading near record-low relative multiples and that 50% of real estate stocks offer a higher yield than 10-year bonds.
The firm expects REITs, which typically pay dividends, to have a total return of 10% to 15% in 2025 thanks to accelerating year-over-year earnings growth, lower supply deliveries, a solid macroeconomic backdrop and reasonable valuations.
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