Michael Gerard is Marketing Director at GRS Group
(949) 272-0022
[email protected]
Like any publicly traded entity, real estate investment trusts (REITs) have their ups and downs.
Things are definitely a bright spot now, though.
REITs are looking great for investors lately. There is a lot of talk recently about how REITs are performing well, when the overall stock market is having issues due to challenges in the global economy.
Since the recession, commercial real estate has had a significant rebound in several major metro areas that were hurt, due to the housing crash, such as Miami and California’s Inland Empire. That has given foreign investors some motivation to put their money into domestic commercial real estate because the global economy is so uncertain. The Brexit situation is a good example of that, and apparently investors are spending more money on office assets here from overseas.
Unfortunately, for some investors in the multifamily commercial real estate sector, this is causing concern. There is some perception that the market is overheated in this area, due to the strong investment demand for apartments.
Well, this is a good problem to have.
There is no indication that the multifamily sector is having any problems. Demand is a good thing, and if it makes more commercial real estate sectors attractive because of the desire to buy apartments, then that is a good thing.
From an investor’s perspective, REITs are currently besting the stocks listed on the S&P 500. REIT returns were reportedly up 3.9 percent, while that S&P index rose 3.7 percent in July.
Plus, REITs are being taken more seriously by Wall Street, as they are now getting their own index now.
One interesting thing to observe is how back-to-school shopping impacts REITs. Surprisingly, many of the big returns are being realized by industrial commercial real estate REITs, due to the bump that online-retail shopping has experienced. A lot of shopping for children has changed, in the sense that they wear certain sizes and grow out of them pretty quickly. Parents are finding out that they can do this much easier online, sometimes.
That’s not to say that brick-and-mortar retail is dead. Plenty of retail landlords that have had to adapt to the changing shopping environment have dealt with this and made it work. Despite the challenges that the retail industry is battling, retail REITs aren’t doing all that bad, especially ones that are net-lease owners and have good-credit tenants.
Commercial real estate is always going to be a good investment in the United States, and despite what the stock market dictates, it won’t decrease population jumps that are bound to happen, and more people mean more needs for housing, services and jobs.