Mark Howard-Johnson, global head of real estate securities management at BlackRock and winner of the Nareit 2022 Industry Achievement Award, participated in a video interview at Nareit’s REITworld: 2022 Annual Conference held in San Francisco on Nov. 15-17.
Howard-Johnson described how the current real estate cycle compares to previous ones. He noted that “because the Federal Reserve is driving us into this, I think it’s a very different start.”
As for pockets of global opportunity attractive to BlackRock right now, Howard-Johnson noted that due to the lack of visibility into how long and deep this cycle might be, the firm is really focused on long-term secular trends. “I would suggest any kind of communication REITs, towers and data centers, where you know the flow of information is going to increase, regardless of the cycle.”
Single family homes for rent is another sector to watch “because I think millennials care more about the flexibility than they do home ownership, and obviously right now homeownership is pretty expensive.”
Howard-Johnson also said BlackRock is unlikely to make changes to its sector allocations in the coming months.
“We don’t take big sector bets. We’re fundamentalists and go bottom up, so we pick companies before we pick sectors. Sectors are hard to know because the pricing happens so quickly,” he said. “We try not to be market timers, we’re long-term investors. We may be leaning a little away from the cyclically sensitive sectors right now, but that would be about it.”
Turning to how he sees the REIT industry positioned in the face of uncertain economic macro fundamentals, Howard-Johnson noted that “this is one of the things we’ve been most pleased by.” He pointed out that most REITs elongated their debt maturities, fixed debt, and reduced debt, in addition to raising equity. Those steps have “all been pretty powerful,” he said.
“I think in almost every metric we look at they (REITs) should be better positioned,” Howard-Johnson said, giving the companies flexibility coming out of this cycle, however deep it is.