REIT fourth quarter performance and upcoming trends were the focus of a Jan. 9 webinar hosted by Institutional Real Estate, Inc. (IREI) and Nareit. John Worth, executive vice president of research and investor outreach at Nareit, and Raj Rehan, managing director and head of real asset securities at BlackRock, joined Mike Consul, senior editor of IREI’s Real Asset Adviser magazine, for the discussion.

Worth gave an overview of listed REIT performance for the fourth quarter, during which the FTSE Nareit All REITs Index posted a return of 18%. He noted that REITs outperformed the broader market by about 600 basis points, while data centers were by far the strongest performing REIT sector. Rehan added that much of the rebound was due to a change in expectations toward interest rates.

Turning to M&A activity, Rehan pointed out that deals during 2023 reflected “the strong advantage of the REIT model” in times when capital is scarce. He also said more public to public M&A is to be expected this year. Worth described the tendency for REITs to consolidate and increase the value of their operating platform as “definitely a trend to watch,” and one that is highlighted in Nareit’s 2024 REIT Outlook.

Elsewhere in the webinar:

  • Worth and Rehan stressed the importance of diversification when it comes to REIT property sector allocations.
  • High interest rates will continue to be felt in REIT earnings, but the industry has well-managed balance sheets and ongoing access to the debt markets, Worth said.
  • A mix of public and private real estate is the best approach within an investment portfolio, Rehan said.
  • The second half of this decade should see a strong acceleration in demand for senior housing, Rehan noted.
  • Worth pointed to a continuing divide between REIT stock market performance, which is highly macro dependent, and REIT operational performance. The latter will be impacted by how quickly a soft landing occurs as well as the resilience of consumers, he said.