Even though REITs traditionally maintain low levels of leverage – they are still leveraged to a certain degree, Weingarten Realty's vice chairman Martin Debrovner points out. "Most REITs look at their cost of capital as a blend between what debt will cost versus the cost of equity, which is what the shareholder expects to receive on a long term basis," Debrovner says. His conclusion? Even though there are more opportunities available and REITs are relatively well-capitalized, few are strong enough to maintain an acquisition-only strategy. Indeed, as valuations remain unsteady and the duration of the debt market seizure is unclear, Debrovner expects to see more REITs invest in development through JVs this year.

This has been the path, for the most part, for the past several years, thanks to continued cap rate compression. It has been more accretive to shareholders for a REIT to develop, Debrovner explains, as returns are always more than the cost of capital. "If there will be an active REIT acquisition market this year, it will be in the second half," he says.

Timber REITs are another sector-specific play that appears poised to do well in this cycle, says Jerry Miccolis with Brinton Eaton Wealth Advisors, which recently began investing in Plum Creek Timber Co., the first timber company to become a REIT. Timber REITs, which make a very small portion of the REIT universe and are relatively new to the market, are unlike traditional REITs because their income is all long-term capital gains. Miccolis says 5% of the firm's assets under management are invested in timber REITs now; last year none were. The firm began looking at these REITs not to diversify its real estate holdings but as a way to diversify its exposure to commodities. "The modeling work we did last year convinced us to move into timber as a separate commodity class – and REITs are a good way to do that."