In a recent report, Barclays analysts gave their 2015 outlook for real estate investment trusts (REITs). Overall, analysts see a tough environment for the industry this year.

Where Are The Catalysts?

Analysts don’t see many drivers to earnings growth for REITs in 2015. They predict decelerating earnings growth in the space, and with valuations already at historically high levels, it’s hard to see a justification for outperformance. After surging 28 percent in 2014, REITs now trade at even higher multiples than they did before the financial crisis. Analysts believe additional multiple expansion is unlikely and are predicting 9 percent total return for REITs in 2015.

Top Picks

Barclays’ analysts selected their top REIT picks for 2015 in each of the following subsectors:

Industrials: Analysts chose Prologis Inc PLD 0.35% as their top pick because of projected general demand for industrial real estate, Prologis’ supply chain reconfiguration and its global development pipeline.

Apartments: Analysts’ top pick is Camden Property Trust CPT 0.27% because of its attractive valuation and its exposure to Sunbelt markets.

Retail: Analysts like Kimco Realty Corp KIM 0.2% because of the completion of its disposition program and its shopping center exposure.

Offices: Analysts like Alexandria Real Estate Equities Inc ARE 0.84% because of its valuation and growth prospects.

The Interest Rate Mystery

Historically, interest rates and REIT multiples have had a negative correlation. Real estate is a typical “safe haven” for investors during times of geopolitical uncertainty, and REITs’ high yields are appealing in a low-interest environment. The consensus is that the Federal Reserve will likely raise interest rates sometime in mid-2015, and analysts believe that could put pressure on many REITs.

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