Market Commentary

Are low cap rates flashing a signal that speculative pricing is setting the market up for a correction? 

It is often said that “correlations spike to one during a crisis,” but REIT-stock correlations have actually been lower during the worst stock market downturns in history, reinforcing the case for REITs as a portfolio diversifier even during crises.

The economy is enjoying above-trend growth, with some boost from last year’s tax cuts, which supports demand for nearly all types of commercial real estate.

REITs have provided investors solid returns over the years, despite short-term zigs and zags along the way, in part because of structural features of the REIT model.

How to construct an inflation-protecting portfolio without exposing yourself to the risk of guessing wrong about an increase the inflation rate.

Investors who depend on commodity investments to protect against inflation risk negative returns if inflation doesn’t meet their expectations, whereas REITs have historically provided strong returns in both high-inflation and low-inflation environments.

Ask anybody which investments “hedge” against inflation, and real estate is one of the three that pretty much everybody will identify, along with commodities and inflation-linked bonds

REITs have outperformed the S&P 500 in recent months, with a cumulative total return of 14.6 percent since their low point in early February.

Mergers and acquisitions involving REITs have been in the spotlight in recent months. The flurry of proposed deals announced in just the first half of this year put the market on pace to set a new record for merger activity in 2018.

Commercial property prices in April were 9.1 percent higher than one year earlier, according to the CoStar Commercial Repeat Sales Index

REIT diversification benefits come not merely from their low correlations to other assets but also from their historically strong risk-adjusted returns. 

Current REIT fundamentals and equity market conditions suggest that investing in REITs will likely continue to have such benefits in the period ahead.