If you're searching for a sector that will turn in stable-to-positive portfolio performance next year, and you trust rating agencies, then you should take a look at industrial real estate investment trusts, because that's exactly what Moody's Investor's Service expects for industrial REITs next year.

Moody's says in a new report that the U.S. industrial REITs it rates "will experience stable to positive portfolio performance over the next nine to 12 months, continuing the trend of improved same-property net operating income from the third quarter of 2012." Moody's cites positive credit trends including low new property supply, solid tenant quality, diversification and high retention rates.

As their name implies, industrial REITs manage industrial properties such as distribution facilities and warehouses. Moody's lists four industrial REITs that it currently rates: Duke Realty (DUK), First Industrial (FR), Liberty Property (LRY), and Prologis (PLD). The rating agency says credit metrics for these rated industrial REITs have improved in 2012 and it expects continued improvement into 2013, while its rating outlook for the sector is stable.

"Rated industrial REITs still have large unencumbered portfolios with good quality assets and modest on-balance-sheet secured debt levels," says Phillip Kibel, author of the Moody's report. "We anticipate industrial real estate fundamentals will stabilize over the next nine to twelve months, assuming no recession in the US and no large sovereign defaults in Europe."

Moody's cautions that a need for additional leasing to stabilize current development pipelines, coupled with large debt maturities over the next two years, present some risks, but those risks are mitigated by the availability of plentiful cost-effective capital.

Read more: http://blogs.barrons.com/incomeinvesting/2012/11/27/moodys-expect-smooth-sailing-for-industrial-reits-in-2013/?mod=BOLBlog