Rising interest rates can be a valuation headwind for the REIT sector, but some REITs are better positioned than others, says Morningstar's Todd Lukasik.
We prefer REITs with reasonable leverage, moaty assets, demonstrated historical success across economic cycles, identifiable growth drivers, and reasonable margins of safety.
Our favorites can do well even with potentially higher interest rates.
Though many long for faster economic growth, the current environment has actually been very good for landlords--but higher rates could still sting.
REIT prices reset with rising interest rates.
The macro environment remains favorable toward REITs, but valuations generally appear stretched.