Real Estate Assets Holding Firm, Analyst Says

3/23/2016 | By Allen Kenney

Joi Mar

In the latest episode of the NAREIT Podcast, Joi Mar, analyst for real estate analytics with Green Street Advisors, discussed trends in real estate asset valuations.

Mar said that despite signs of a healthy economy in the United States, the market is giving off "mixed signals." Although the employment picture bodes well, the strength of the dollar, concerns about China and fluctuations in the energy sector are weighing on economic growth, according to Mar.

On the supply side of the market for commercial property, Mar said development pipelines have yet to get out ahead of demand for space. For the most part, the biggest concerns come from "shadow supply" in the form of bankruptcies of retailers and anchor tenants closing, according to Mar.

Overall, "occupancy and rent growth are healthy across most property sectors and geographies," Mar said.

Looking at valuations, Mar said Green Street is observing signs of weakness, "but value declines are not widespread and not consistent across markets and asset quality." However, Mar noted that asset valuations for the lodging sector appear lower "across the board."

In terms of potential problems in geographic markets, Mar singled out Houston. She noted that asset values have fallen for nearly every property type in Houston, driven by declines in energy prices.

Meanwhile, the apartment REIT sector looks attractive, according to Mar, who said REITs are trading at notable discount to their underlying asset values. For direct investors, Mar said self-storage "cap rates are too high relative to other property types."

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