As we move into the second half of 2021, the U.S. economy and our own industry are facing a future that is far brighter than it appeared in the dark days when this year began.
In the year’s first half, we’ve seen extremely effective vaccines rolled out to battle the pandemic, and as of now, well over half of the adult American population has been vaccinated.
People are coming out of their homes where they’ve sheltered for the past year, and they are going back into stores, restaurants, and theaters. The American economic engine has re-started, and recovery is spreading across all sectors of the economy including commercial real estate and the REIT industry.
The ability of REIT-based real estate investment to persist through the downturn and recovery is due to the resilience built into the REIT model. It is a model based on maintaining strong balance sheets with low to moderate leverage. It’s also a model that provides access to the public capital markets, which equip REITs with financial flexibility that private real estate investors don’t have.
Additionally, it is a model that enables investors to gain exposure to real estate representing a broad expanse of our economy, from traditional segments like retail, office, and residential, to segments like cell towers, data centers, and logistics facilities that drive our digital economy and today account for almost 40% of equity REIT market cap.
This issue of REIT Magazine focuses on our industry’s recovery. “Building Back” takes a close look at development, which was put on hold in most sectors of the REIT marketplace at the beginning of the pandemic. Today, development is gradually coming online again, and pipelines are refilling for later this year, for 2022, and beyond.
“On the Road” reports that leisure travel is driving the hotel segment’s recovery as higher personal savings rates, fiscal stimulus payments, and the availability of COVID-19 vaccines have combined to trigger the release of pent-up demand for vacation travel. Lodging REITs that cater to business, group, and convention travel, however, face a longer road back.
“Stepping Out” tells the story of a retail mall segment that is stabilizing, with increased customer traffic and leasing activity approaching pre-COVID levels. Landlords also are reaching out to new types of tenants to fill vacant spaces—tenants ranging from co-working companies to medical facilities to children’s museums.
Overall, the horizon is brightening for the entire REIT industry, and the investment markets have taken notice. At the close of this year’s first half, REIT shares across almost all segments of our industry were delivering double-digit returns and significantly outpacing the S&P 500.
This issue of REIT Magazine shares important stories about the REIT marketplace and the REIT approach to real estate investment. I hope you find them as informative as I have.
James F. Risoleo
2021 Nareit Chair
President, CEO & Director,
Host Hotels & Resorts