11/23/2020 | by

Steve Buller, Portfolio Manager, Fidelity Investments

"From the original REIT legislation attached to a tobacco bill to becoming a mainstream investment. From the primary real estate food groups of office, retail, and apartments to a diversity of real estate sectors. From passive owners of buildings to large platforms involved in all aspects of property. What will the future bring?

I believe there will be increased emphasis on REITs as inflation hedges, yield providers with a modest amount of growth, a source of diversification, and a potential performance offset to the ‘FANG’ world of today. Within REITs, leverage levels that have perhaps dropped too low are likely to be examined.

Although there are many positives, there are some headwinds. In many property types, long-lease income has increasing durability questions and I do believe lease durations will continue to contract. Additionally, there are still questions surrounding the future viability of bricks-and- mortar retail and the use of office. Change creates opportunity. I am certain that today’s REIT industry will adapt and thrive just as it has for the past 60 years.”

Keven Lindemann, Senior Director, Global Real Estate, S&P Global Market Intelligence

"Thirty years ago, health care was a fringe property sector in the REIT industry. Now we see health care companies among the 20 largest REITs, owning thousands of properties. Twenty years ago, data centers and telecommunications companies were on the fringe. Now they are among the largest publicly-traded U.S. REITs. Ten years ago, single-family rentals were not considered institutional.

It’s been a remarkable evolution since the days when REITs were dominated by office, industrial, retail, and apartments. It’s created challenges for investors, learning how to analyze the drivers of these unique asset types. But these new property sectors have fueled much of the growth in the REIT space, and they ensure that REITs reflect the evolution of the U.S. economy.

I expect a continued expansion in non-traditional property types, perhaps in infrastructure, and that’s a very good thing for REIT investors.”

Mary Hogan Preusse, Founder and Principal, Sturgis Partners LLC

"Taking a long view has always been essential to successful real estate investing. As a result of the pandemic, we’re absorbing what McKinsey calls “the great acceleration”—an intensification of trends that were already underway.

This rapid change should dramatically impact much of the REIT industry for years to come, especially the conventional real estate asset classes. One outcome of this disruption is likely to be consolidation in those sectors, leading to fewer, larger, more dominant REITs that have the resources to drive earnings via economies of scale, redevelopment, and innovation.

Technological innovation and flexible thinking will be essential components of continued progress for REITs. It’s not hard to envision a time when REITs shift from investing in the technology products of other companies to developing proprietary alternative strategies and technologies for their own portfolios, which could become scalable and valuable sources of growth for REITs.”


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