Michael Knott, head of U.S. REIT research at Green Street, told the REIT Report podcast that REITs have enjoyed a number of tailwinds so far this year, including an AI-driven selloff across broader markets, lower interest rates, and strong access to debt capital. He described it as “a little bit of a nice comeback for the industry on a relative basis.”
At the same time, Knott notes that these positive tailwinds are set against a cross current of a weaker outlook on the employment side.
During the interview, Knott also commented that one of the newer trends that many larger REITs are gravitating to is fund management and gathering private pools of capital as an alternative to public equity to fund their business.
Knott made a number of other observations, including:
- There is a growing expectation that values in commercial real estate are well positioned to appreciate from current levels.
- Transaction activity has rebounded “pretty nicely” across the commercial real estate industry more broadly.
- Investors are increasingly focused on quality and growth in REIT selection.
- Senior housing is experiencing a “golden age” of strong growth and demand.
- Retail REITs are showing resilience and positive performance. “Leasing has been really good across high quality malls and strip centers. So the foundation is there and it's really good.”
- AI's impact on employment could affect REITs in the future.
- REITs provide a diversified investment opportunity in commercial real estate.
- Investors in REITs are likely to benefit from recent underperformance compared to the S&P.