Barlow’s Research Roundup: ‘Good upside’ ahead for these REITs, says a RBC analyst

Daily roundup of research and analysis from The Globe and Mail’s market strategist Scott Barlow

Real estate

RBC Capital Markets analyst Pammi Bir assessed the REIT sector’s 2025 and provided top picks for 2026,

“Our Q4/25E reflect 3-per-cent sector average year-over-year FFOPU [funds from operations per unit] growth, up from the 2-per-cent posted last quarter. As usual, the range across subsectors is wide. We expect self-storage to assume leadership (up 6 per cent), marginally ahead of seniors housing (up 5 per cent) and multi-family (up 5 per cent), followed by industrial (up 2 per cent) and retail (up 2 per cent). In contrast, we expect office (down 3 per cent) and diversifieds (down 9 per cent) to notably lag. … While 2026 organic growth will likely moderate from the double-digit levels of 2025, we expect seniors housing to maintain leadership in SP NOI [single property net operating income] and earnings growth, supporting valuations across the group. In industrial … we noted on Jan-7, market fundamentals appear to be approaching an inflection point as new supply pressures fade and tenants get off the sidelines. GRT’s leasing update last month provided another encouraging sign. All said, we see 2026 SP NOI growth ranging between the low-to-mid-single digits for the group. In self storage, fundamentals appear to have bottomed with the asset class remaining highly desired as evidenced by recent private market trades. As for retail, tenant bankruptcies and closures are relatively quiet through Q1/26 to date (e.g., Toys ‘R Us, Eddie Bauer). Our 2026E reflect 2-4-per-cent organic NOI growth, supported by robust demand, muted new supply, and solid leasing spreads. Updates on backfilling HBC space will also be in focus (PMZ, REI), along with capital recycling, particularly for REI and FCR (2026 marks final year of FCR’s three-year strategic plan). In residential, we expect investors to focus on market rent trends, which have continued to grind lower. In office, 2026 guidance will be in the spotlight, including asset sales for both AP and D. While organic growth should accelerate, we remain on the sidelines given elevated debt levels and weak earnings growth forecasts. Among diversifieds, for HR we expect the focus to remain on dispositions as it transitions to a residential and industrial focused REIT”

Mr. Bir expects “good upside” from his outperform-rated names which are Boardwalk REIT, BSR REIT, CAPREIT, Flagship Communities REIT, , Killam Apartment REIT, Minto Apartment REIT, Chartwell Retirement Residences, Extendicare Inc., Sienna Senior Living, Dream Office REIT, Granite REIT, First Capital REIT, Primaris REIT, RioCan REIT, SmartCentres REIT, H&R REIT, StorageVaultCanada Inc.

Tech

Scotiabank analyst Patrick Colville offered some software stocks that should be immune from AI disruption,

“Hyperscaler results we see as deeply valuable given customers run Datadog, Elastic, MongoDB, and Snowflake tools on their infrastructure. DDOG, ESTC, and SNOW have a particularly strong relationship to AWS, Azure and GCP revenue growth (r-squared >0.75) since 1Q 2020. Datadog: Public cloud results and commentary we see as positive for Datadog, which we rate Sector Outperform. Datadog benefits from a rising tide of spend on AWS, Azure and GCP, as more cloud native infrastructure workloads = more observability, and Datadog is the leader in monitoring modern environments … Hyperscaler results are relevant to MongoDB, which we rate Sector Perform, given Atlas runs on public cloud infrastructure. Strong results at AWS, Azure and GCP should be a positive for MongoDB Atlas as database modernization is a part of cloud modernization. But based on our conversations expectations are high, especially with shares outperforming the IGV by a whopping 21 ppts over the past 3 months. We recently attended MongoDB.local SF where we spent the day talking with customers to get a real time pulse on demand. Our fieldwork was a slight uptick on MongoDB’s ability to benefit from enterprise AI adoption, highlighted by multiple enterprise conversations around Vector Search and Voyage AI embeddings. The confirmation that Anthropic is leveraging MongoDB validates MongoDB’s ability to win complex AI-native workloads….WS trends are the most relevant to Snowflake as ¾ of deployments are on Amazon. AWS growth accelerated by 337 bps in 4Q25, which we see as a positive to Snowflake, which we rate Sector Outperform. Amazon 4Q call commentary on migration of workloads to the cloud within AWS was undoubtedly positive’

Credit

BofA Securities head of global research Candace Browning Platt highlighted research showing that the weakness in software stocks is now apparent in credit markets,

“Concerns that generative AI could disintermediate enterprise software quickly moved from equities into credit. Tech concentration is highest in Private Credit (approximately 20 per cent of AUM), followed by Loans (14 per cent), Investment Grade (7 per cent), and High Yield (4 per cent). Private Credit valuations have been insulated so far by illiquidity, so risk is currently most acute in Loans, with about 95 per cent of Software & Services issuers rated B/CCC, leaving the market highly sensitive to negative sentiment. The recent market selloff has become increasingly indiscriminate, hitting credits regardless of quality or actual AI exposure. Neha Khoda expects future episodes of AI-led volatility in credit markets, with CCC loans likely to suffer disproportionately. Still, she contends that these “sell what you can” environments often set the stage for alpha-rich dislocations. Since the weakness was selective, limited to software loans rather than a complete wipeout of the CLO market, Pratik Gupta describes the risk as ‘bugs, not roaches,’ pointing out that the selloff has created opportunities”

The CDS prices for Oracle debt has been the proxy for this trend and continues to be worth watching.

Bluesky post of the day

Diversion

“CRISPR Meets Caffeine: Scientists Develop New Approach to Cancer Treatment” - SciTechDaily