After study the rich's portfolio, noticed that they allocate about 20% of their wealth in REIT and 30% in bonds. I would think that it's safe to divest the bond's part into REIT, spread into all types of REITs. The purpose is to further diversify the risk, a particular REIT's actually already diversify into many properties, now we just play safe by investing in all types of REITs, such as retail, residential, healthcare, office, industrial...
What happen when interest rate increase?
Bond price will go down if interest rate increase. Same will apply for REIT, however, most of the time, rental will increase in every 3 to 4 years. This partially offset the negative impact of interest rate high, though cost of financing will increase. It would be a good opportunity to buy good Reit with best price. (Actually due to inflation, most of REITs will increase in value every year, hence quite rare can buy REIT at cheap price, if so happen, it's a bonuses)
Why we ignore about bonds and replace with REIT?
The reason is from the history record of US between 1990 to 2010, the average REIT's return is 9.9% vs fix asset income and commodities of 7.5% and 4.5% a year. The stock market have the return of 10.3% return, however, one need to have courage to buy near the bottom and sell at the high. However, it is difficult to buy near low and sell high, further, how can one knows when is low and high? You may miss out one of the opportunity and your return will actually much lower.
Hence, REIT's are the true total return, no matter market up or down. They provide long term dividend and capital appreciation. Any down year is a chance for your to invest more with lower cost and provide better dividend yields.