REITs Should Weather Rate Hike, Analyst Says

Mark Roberts

In the latest episode of the NAREIT Podcast, Mark Roberts, head of strategy and research with Deutsche Asset & Wealth Management, offered his thoughts on the near-term outlook for the real estate market.

Roberts said the Federal Reserve’s decision earlier this month to hold off on an interest rate increase didn’t come as a surprise. However, in light of the seeming inevitability of an interest rate hike in the near future, Roberts downplayed the potential effects on the REIT industry. He noted that real estate yields still trade at positive spreads.

“The fundamentals in real estate still seem pretty well intact to deliver at least average long-term returns,” he said.

Regarding those market fundamentals, “there are few times over the course of any real estate cycle when times can be as good as they are right now,” according to Roberts. He pointed out that the new supply of space remains constrained. Meanwhile, he noted, the labor market is seeing healthy employment growth, which should translate into declining vacancy rates. Most importantly, rents should start to rise in conjunction with the growing demand for space, according to Roberts.

In terms of capitalizing on the trends, Roberts highlighted the opportunities offered by the “late-recovery markets,” such as Southern California.

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