On Tuesday, BMO (TSX:BMO) Capital released its '2025 Outlook' note, highlighting its top picks for office real estate investment trusts (REITs). The firm remains bullish on the New York City office market, which has shown resilience with a notable 110 basis points (bps) improvement in occupancy and a 90bps increase in net operating income (NOI) margins.
BMO Capital anticipates that office REITs will continue their aggressive strategies in the coming years, with the cryptocurrency DOGE mentioned as a significant unpredictable factor.
The analyst pointed out that the office sector has been a relative winner year-to-date and is expected to perform in line with other REITs in 2025. This performance is partly attributed to the sector benefiting from the recent elections. The firm also forecasts that visitations will improve, further bolstering the office REIT market.
Despite the overall positive outlook, BMO Capital has adjusted its ratings for certain REITs. The firm downgraded JBG Smith Properties (NYSE:JBGS) to 'Underperform' due to a decline in office occupancy. Conversely, Cousins Properties (NYSE:NYSE:CUZ) was moved to 'Market Perform' following a strong performance in 2024.
According to InvestingPro data, CUZ has delivered an impressive 50% return over the past year and is currently trading near its 52-week high of $32.55. The REIT has maintained dividend payments for 45 consecutive years, though analysis suggests the stock may be trading above its Fair Value.
The top office REIT picks by BMO Capital are Boston Properties (NYSE:NYSE:BXP), Empire State Realty Trust (NYSE:NYSE:ESRT), SL Green Realty (NYSE:NYSE:SLG), and Vornado Realty Trust (NYSE:NYSE:VNO). These REITs are expected to lead the market, reflecting the analyst's confidence in their potential to outperform in the dynamic New York City office sector. For deeper insights into these REITs and access to comprehensive Pro Research Reports covering 1,400+ US equities, visit InvestingPro for exclusive financial metrics and expert analysis.
In other recent news, Cousins Properties Incorporated announced a public offering of 6 million shares, aiming to raise approximately $188 million. The offering is managed by Bank of America (NYSE:BAC) Securities and is part of Cousins Properties' strategy to create shareholder value. Recently, the company also acquired Vantage South End, a lifestyle office property in Charlotte, for $328.5 million, expanding its presence in the South End submarket.
Cousins Properties reported a robust third quarter with Funds From Operations (FFO) reaching $0.67 per share and a 4.4% increase in same-property net operating income. This strong performance led to an upgrade in the company's 2024 FFO guidance to between $2.66 and $2.70 per share.
In terms of analyst attention, Baird, a financial services firm, recently upgraded its price target for Cousins Properties from $31.00 to $33.00, maintaining an Outperform rating. Baird highlighted the company's strong leasing pipeline and balance sheet strength as key factors in this decision.
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