In February, “longtime investor” Sonny Kalsi told Barron’s that the commercial real estate sector would make a comeback in 2025. The publication noted that Kalsi, who co-manages an investment division of Canadian insurer Sun Life called BGO, handles about $80 billion of commercial real estate investments. Although the bottom 25% of office properties are dead and buried due to the work-from-home trend, the top quartile of offices are still full and fetching high rents, Kalsi explained.
Furthremore, a great deal of money is going to be made by those buying the ” middle 50% of office assets.” Meanwhile, the outlook of industrial properties and data centers is positive. Banks will resume lending to commercial real estate companies again when the Federal Reserve starts cutting rates, he stated. Similarly, investment manager Invesco predicted that lower interest rates would spark a recovery in commercial real estate later this year. Here are three commercial real estate stocks to buy.
CBRE Group (CBRE)
In April, investment bank William Blair identified CBRE (NYSE:CBRE) as one of the four best names with which to play a rebound of the commercial real estate sector.
At that time, William Blair reported that the sector was already starting to rebound, even though the pace of sales remained anemic. However, according to William Blair, the demand for real estate services started to increase last quarter, and CBRE provides such services, Barron’s noted.
Correlating with the latter information, CBRE’s top line did increase 7% last quarter versus the same period a year earlier to $7.935 billion. Moreover, its net income climbed 8% year-over-year to $126 million.
“Leasing outperformed expectations, driven by office leasing growth globally that reflects a resilient economy and companies making progress on bringing their employees back to the office,” CBRE CEO Bob Sulentic explained in a statement.
The shares have a very low price-to-sales ratio of 0.84 times, and the company’s fairly rapid growth and low valuation make it one of the best commercial real estate stocks to buy.
Colliers International (CIGI)
Colliers International (NASDAQ:CIGI) “provides commercial real estate professional and investment management services” globally. The company’s exposure to countries other than the U.S. likely reduces the extent to which it will be hurt by the work-from-home trend. That’s because the latter change is much less intense in other regions, such as Asia.
In Q1, Collier’s top line advanced to $1 billion versus $966 billion during the same period a year earlier. What’s more, its operating income jumped to $43.3 million versus $22.1 million in Q1 of 2023.
“Our focus on expanding high-value, recurring service lines is paying off handsomely, reshaping and repositioning our business for the future.,” CEO Jay Hennick said in a statement.
The company reported that its Outsourcing & Advisory unit had performed particularly well in Q1, led by its engineering and project management business. The firm expects the latter trend to continue throughout the year. Moreover, Colliers stated that it was ” cautiously optimistic about improving transaction velocity in the late second half of 2024,”
The firm continues to expect its earnings per share to jump 15% in 2024.
Boston Properties (BXP)
In a update earlier this month, office-space owner Boston Properties (NYSE:BXP) reported that it was leasing more offices than at any point over the past 12 months. Moreover, the firm noted that its share of the office-leasing market was increasing a great deal. Also importantly, Boston Properties stated that it was not having trouble obtaining loans.
And in the long term, the firm expects to benefit from higher demand for office space by the tech sector in New York, one of its key markets.
In Q1, the company’s top line climbed 4.5% versus the same period a year earlier to $839.4 million, while its net income rose to $79.9 million from $77.9 million in Q1 of 2023. The company reported that its highest quality office space “was 91.0% occupied and 92.8% leased.”
Analysts, on average, expect its EPS to advance to $2.18 this year versus $1.21 in 2023. Overall, the company’s business appears to be rebounding meaningfully, making it one of the best commercial real estate stocks to buy.
On the date of publication, Larry Ramer did not hold (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines
