The Morgan Stanley REIT (Real Estate Investment Trust) Index is up more than 10 percent over the last three months. But should investors worry that corporate real estate will follow residential housing downward?
Richard Anderson, senior research analyst at BMO Capital Markets, and Louis Taylor, senior REIT analyst at Deutsche Bank Securities, are divided on what the market is saying -- but both agree that some REITs are ripe for investment.
"There's a paralysis. No one knows where cap rates are going," said Anderson. He believes that a tighter credit market will lead to more renting of properties.
But Taylor sees it differently. "Right now, cash flows are looking good" for REITs, Taylor said. But he's bearish on apartment-building firms -- and bullish on retail REITs.
He addressed General Electric's earnings miss -- and maintained that GE's real-estate businesses differ from the REIT market.
(GE is the parent of CNBC.)
Anderson points investors to AvalonBay Communities and Mid-America Apartment Communities.
Taylor likes Macerich, General Growth Properties, Simon Property Group and Public Storage.
Taylor's firm holds shares in Macerich Group, General Growth, Simon Property and Public Storage. Further, Deutsche Bank received compensation from all four firms; General Growth is or may have been an investment client of Deutsche Bank. Neither Anderson nor BMO have any holdings or business relationships with either of the firms he recommended.