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REIT Veterans Predict Significant Growth of Industry

11/13/2013 | By Sarah Borchersen-Keto

REIT Veterans Predict Significant Growth of Industry

Prospective growth for the REIT industry appears significant going forward, according to participants in a REITWorld 2013 panel looking at the future of the industry.

NAREIT Chair Ron Havner, chairman, president and CEO of Public Storage (NYSE: PSA), moderated the panel, which included Ric Campo, chairman and CEO of Camden Property Trust (NYSE: CPT); Hap Stein, chairman and CEO of Regency Centers Corp. (NYSE: REG); Mike Kirby, chairman and director of research at Green Street Advisors, Inc.; and Robert Steers, Cohen & Steers Capital Management's co-chairman and co-CEO. The panelists agreed that the REIT industry would be supported in part by strong international capital flows and increased investor interest in the sector

Kirby said the REIT story "has always looked good to us, and today it looks outstanding."

Steers said prospective growth is "significant," noting that REIT stocks are finding their way into 401K retirement plans in a "meaningful way" by means of target date investment funds. Furthermore, he characterized global capital flows into REITs as "massive."

Kirby and Steers both advised REITs to keep their business models simple.

"The simpler the better is what we're looking for," Kirby said. Steers stressed that REITs should "focus on what you do well."

Steers predicted that the next 10 years won't resemble the last 10-to-20-year period of low interest rates and little inflation.

"The key to success in real estate will be different going forward," he said. Steers also emphasized that pricing power will be important as interest rates and inflation begin to rise.

In the near term, Stein cited occupancy rates in the retail sector as one of the key themes coming out of the economic slowdown: "How much can you push the envelope at the upper end of occupancy?"

Campo discussed the underperformance of apartment REIT stocks despite a favorable operating environment. He encouraged multifamily companies to consider building in the "middle of the country," referring to apartment markets that might be underdeveloped.