Sustainable forestry and timber REITs are also a highly attractive proposition in the current economic climate. High levels of inflation is likely to keep lumber prices high, which benefits North American forestry REITs Potlatch Deltic and Weyerhaeuser. The increased focus of sequestration and use of sustainable wood products in building materials provides tailwinds for this sector that remains underappreciated by UK-based property investors.
The FP Foresight Sustainable Real Estate Securities Fund invests in listed and liquid REITs. The fund invests in REITs that own properties in industries that are set to benefit from changing consumer habits (data centres), that have sustainability at the core of the proposition (forestry and timber), that have highly credit-worthy counterparties and secure income streams (e-commerce logistics facilities) and that benefit from high levels of mechanical inflation linkage and are critical to the functioning of society (healthcare).
Some consumer habits have changed forever but some are slowly reverting to normal, sub-sector rotations are less likely to influence returns as dramatically or as quickly as they have been during the past two years.
The focus now needs to be on quality operators of sustainable property assets in global growth sectors with inflation protection. Most importantly they need to be liquid.
Nick Scullion is a partner at Foresight Group
