Ian Ritter is online content manager at GRS Group
Real estate investment trusts (REITs), like other financial stakes, have their ups and downs.
It’s been more up than down in the recent past, though. REITs have seen returns of 12 percent since 2000, according to a Wall Street Journal report. That beats the 7.9-percent that high-yield bonds turned in and the 4.1-percent returns of high-yield stocks over that period.
Due to this, in part, REITs are going to become their own category in the stock market later this month.
The National Association of Real Estate Trusts (NAREIT) had its major REITWeek conference recently, and the overall news about these firms was positive.
At conference, NAREIT’s, chairman, Ed Fritsch, who is also the president and CEO of Highwood Properties (HIW), said that REIT fundamentals are “healthy,” the balance sheets of the firms have improved and there is increased interest by investors. He also called the addition of REITs onto the Global Industry Classification Standard (GICS), which makes the assets their own listings by industry, a “watershed moment,” that backs up how seriously investors are taking these companies.
Meanwhile, Dirk Aulabaugh, a managing director at investment and advisory firm Greenstreet Real Estate Partners, said that offices, malls and multifamily assets are the properties investors are targeting right now. He also said that the frequency of these transactions will increase in the near future.
On the commercial real estate development end for REITs, GlobeSt.com points out that development has become a major priority for these firms as of late because building assets provides better returns than buying, despite fears of overbuilding.
Financial publication Kiplinger’s has some particular stock picks when it comes to REITs. It likes Gaming Leisure and Properties (GLPI), Host Hotels & Resorts (HST), NNN owner Realty Income (O), Sovran Self Storage (SSS) and STAG Industrial (STAG) as investments because they have potential for high yields. They are also a bit under the radar screen compared to big names, such as Hilton.
Finally, Zacks points out that investors don’t seem to be worried about increases in interest rates that could face the commercial real estate industry, especially regarding REITs. It doesn’t look like it will happen soon, due to the not-very-favorable job-growth reports. The plus for REITs, is that a lower-interest-rate economy, while it might be a sign of slow growth overall, helps them in their earnings and operations.
It’s hard to predict the future, but at least the near term seems favorable for the REIT sector.