While an all-out trade war would certainly be bad from most asset classes, we do think that REITs would fare better and there're a couple of reasons behind that.
First and foremost, REITs derive the majority of their revenues from properties that they own here in the United States. Secondly, when we compare REITs versus the S&P 500, REITs rank as the third lowest exposure to international markets out of all the sectors within the S&P 500.
Strongest Sectors For 2019
Going into 2019 there are two key themes that we're going to invest upon. The first is all forms of rental housing and there are two major drivers behind that. Number one, we think we're going to be in a higher interest rate environment. So that will slow the single family for sale market, while at the same time we still have strong employment growth and we're experiencing the tailwinds of demographics. That should lead to outsized demand for rental housing like traditional apartments, single family for rent or manufactured and senior housing.
The second area that we're excited about is secular growth stories and we think data centers and towers fit well within that theme. And that's largely because the proliferation of data, the growth in data will ultimately drive demand for these property sectors.
Are REITs Worth Owning Today?
We always believe that REITs should play a part in an investor’s portfolio because of their history of strong returns and the diversification benefits that they provide because of their low correlations with other asset classes.
Thomas Bohjalian is head of U.S. real estate at Cohen & Steers.