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Underserved Markets Have Opportunities for Listed REITs, Buller Says

11/13/2013 | By Mitch Irzinski

Steve Buller, portfolio manager with Fidelity Investments, joined REIT.com for a video interview at REITWorld 2013: NAREIT’s Annual Convention for All Things REIT at the San Francisco Marriott Marquis.

Buller discussed which international markets surprised him in 2013 for the better.

“I would say Japan,” he said. “You have Abe economics at work. There are three things which he is trying to accomplish. First, is to generate some inflation. Second, a quantitative easing program. And third, depreciating the yen. Initially, we did not see any of those three ‘arrows,’ as they call them in Japan, help the real estate sector, but more recently, we have. For example, the vacancy rate in the Tokyo office market has started to come down, and we’ve actually seen a bottoming of rental rates. I think very soon you'll see rental rates go up. So, initially, we saw the share prices do very well in anticipation of that, and now that's playing out."

Buller also talked about international markets that are underserved and could be targets for growth by listed real estate investment.

“I would say the health care arena,” he said. “Over the past decade here, we've seen the health care REITs grow tremendously. I think you're starting to see initial signs, whether it's Japan, the U.K. or Australia, that pretty soon you'll see some listed REITs sectors in those markets."

Buller shared his opinion regarding what the big story will be in the REIT market in 2014.

“I think a year from now, we'll look back and interest rates will have risen, but you'll see the actual REIT markets themselves do better,” he said. “As we've seen over time, interest rates can work both ways - they can help, they can hurt. Usually when interest rates are rising, it portends good economic growth and good real estate fundamentals. On the flip side, when interest rates rise, the cost of capital goes up. I think in that tug of war, you'll start to see the other side of the tug as we sit here a year from now.”

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