His top retail pick is Simon Property Group. "It's the big dog in the regional mall space and is one of the best companies out there, period," says Moore, who adds that its strengths include a strong balance sheet, great management and an international presence. "They can position themselves for the next 15 years with a bigger international push and by taking advantage of others' weaker balance sheets," he says.

Elsewhere in REIT-land, Moore likes the earnings outlook in the industrial warehouse sector, along with specialty office properties that aren't tied to the vagaries of the economy. In the industrial area, he likes ProLogis, the world's largest owner and manager of warehouses. He says its presence in port cities puts it on the front lines of global trade.

Moore favors two companies in the specialty office space. Digital Realty Trust provides data center space that's in big demand from tech companies and financial institutions. "Digital Realty is the dominant player in this space, and they have little competition," he says. The other, Corporate Office Properties Trust, focuses on government, defense and intelligence contractors.

Homes Out, Apartments In

Home ownership rates dipped to 67.8% at the end of last year from a peak of 69.2% in 2004, while apartment occupancy rates have hovered in the mid-90% area. It seems logical that rentals would benefit in a tough single-family home environment marked by tighter credit and rising foreclosures, which helps explain the comeback of the apartment REIT sector in the first quarter.

Another thing in their corner is that residential rental REITs qualify for cheap and readily available financing from Fannie Mae and Freddie Mac, in effect giving them a subsidy from the two government-sponsored mortgage agencies that helps lower their costs, support asset values and boost the return on their investments versus other REITs. "Apartment REITs have a cost-of-debt advantage of about 50 to 150 basis points," says Haendel St. Juste, an analyst with Green Street Advisors.

But apartment REITs face some pressures, too. For starters, they might suffer in a recession when job growth stalls because there's a strong correlation between apartment demand and job growth. In addition, there's growing competition from the so-called shadow market of unsold single-family houses and condos being turned into rental units in overbuilt areas such as Miami, Las Vegas and Phoenix.

"There's a fundamental tug-of-war going on in the sector," says St. Juste, "but we feel there will be sufficient demand to generate low- to mid-3% revenue growth in apartment REITs in 2008." His top picks include AvalonBay Communities, which he says has the highest-quality and best-located apartment portfolio in the space in such markets as Seattle, northern California, New York City, Boston and Washington, D.C.

St. Juste also likes UDR Inc., which recently sold 86 of its lower-growth, lower-quality apartment properties for $1.7 billion. He says the result is a better-positioned portfolio with improved growth prospects and money in hand to buy back stock, reduce leverage and make strategic acquisitions.

To Buy Or Not To Buy