The real estate market has completely shifted, UBS says. Here are 12 of its top stock picks

Published Thu, Jul 1 20217:30 PM EDT

Lucy Handley @in/lucy-handley-b2b0a61a/@lucyhandley

The coronavirus pandemic sent shockwaves through real estate markets around the world. Now, in a 250-page report, UBS takes a deep dive into the sector and names 12 of its favorite stocks in the U.S., China and beyond. The UBS report, published Monday, highlighted the dramatic impact the pandemic had on everything from prime office space to retail properties. Real estate has "shifted markedly," analysts led by Osmaan Malik noted, but some sectors are now growing strongly. "The renaissance of the industrial sector as demand for warehousing and logistics has boomed, the emergence of technology-serving opportunities (datacenters and towers) and the relative resilience and ongoing M & A in residential sectors, has driven strong secular growth," they wrote. WFH debate Other factors include how much working from home — boosted around the world by pandemic lockdown measures — will affect prime office space. "The great WFH debate continues to rage on, with share prices rising nonetheless. Our central view remains consistent: while there may be a net reduction in demand, it is likely to be contained, as de-densification, peak occupancy, reduced construction levels, change-of-use potential all mitigate the overall impact on market vacancy," the analysts wrote. And, while many brick-and-mortar stores are under threat from e-commerce, luxury malls in China are set to provide an investment opportunity as asset management firms consolidate and "winners take all," according to the analysts. Here are some of their top stock picks, all buy-rated by the bank: US In the U.S., the bank favors cell tower real estate investment trusts (REITs) American Tower Corp and SBA Communications . "The industry is in the early stages of a multi-year investment cycle and demand for wireless infrastructure and connectivity has never been more apparent," the analysts wrote. UBS also likes logistics and warehousing REITs Prologis and Duke Realty . "The robust demand, rational supply, accelerating ecommerce, and the potential for inventory builds lead us to continue to recommend both," the analysts stated. China Chinese stocks favored by the bank include CR Land , a luxury mall operator that saw retail sales increase by 111% between February 2021 and the same month in 2019, and Longfor , a retail and residential developer operating in around 60 cities in China. Both operate under a Transport Oriented Development model (TOD), meaning real estate is built close to transport hubs, and UBS said Longpfor has higher margins as a result. Swire Properties also makes the cut, due to a "promising outlook for its retail mall business in China," as well as early signs of recovery for offices in Hong Kong, UBS said. UK In the U.K., developers British Land and Land Sec are short-term picks for the bank, which said both stocks remain discounted. Longer term, it likes "high quality" stocks Derwent and Great Portland Estates , both of which own prime real estate in central London. Japan In Japan, UBS's top pick is Mitsui Fudosan in part for its recognition of a need for mixed-use developments that blend working, living and shopping. "The barriers between property types as places for these activities are weakening and the company is starting to respond," the analysts wrote. UBS's "Global Real Estate Analyser" is published bi-annually and includes analysis of 200 stocks by 30 analysts.

A construction site in Hong Kong.

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