Industria REIT (ASX:IDR) is a AUDA$408.73M real estate investment trust (REIT), which is a collective vehicle for investing in real estate that began in the US and has since been adopted worldwide as an investment asset. Real estate analysts are forecasting for the entire industry, negative growth in the upcoming year , and an overall negative growth rate in the next couple of years. Unsuprisingly, this is below the growth rate of the Australian stock market as a whole. Today, I will analyse the industry outlook, and also determine whether Industria REIT is a laggard or leader relative to its real estate sector peers. View our latest analysis for Industria REIT

What’s the catalyst for Industria REIT’s sector growth?

Concerns surrounding rate increases and treasury yield movements have made investors dubious around investing in REIT stocks. This is because REITs tend to be dependent on debt funding. They are also considered as bond investment alternatives due to their high and stable dividend payments. Over the past year, the industry saw negative growth of -4.47%, underperforming the Australian market growth of 6.90%. Industria REIT leads the pack with its impressive earnings growth of over 100% last year. However, analysts are not expecting this industry-beating trend to continue, with future growth expected to be -63.52% compared to the wider REIT sector growth hovering next year.

Is Industria REIT and the sector relatively cheap?

REIT companies are typically trading at a PE of 8x, below the broader Australian stock market PE of 18x. This illustrates a somewhat under-priced sector compared to the rest of the market. Furthermore, the industry returned a higher 15.57% compared to the market’s 11.86%, making it a potentially attractive sector. On the stock-level, Industria REIT is trading at a PE ratio of 5x, which is relatively in-line with the average REIT stock. In terms of returns, Industria REIT generated 29.87% in the past year, which is 14.30% over the REIT sector.

What this means for you:

Are you a shareholder? Industria REIT is a REIT industry laggard in terms of its future growth outlook, and is trading relatively in-line with its peers. If your initial investment thesis is around the growth prospects of Industria REIT, there are other REIT companies that are expected to deliver higher growth in the future, and perhaps trading at a discount to the industry average. Consider how Industria REIT fits into your wider portfolio and the opportunity cost of holding onto the stock.

Are you a potential investor? If Industria REIT has been on your watchlist for a while, now may not be the best time to enter into the stock. Its growth is expected to be lower than its REIT peers in the near term, and it is also trading at a PE in-line with these companies. If growth and mispricing are important aspects for your investment thesis, there may be better investments in the real estate sector.