Brexit Vote Doesn’t Slow REITs

In the latest edition of Quick Study, Brad Case, NAREIT’s senior vice president for research and industry information, said optimism among U.S. real estate investors seems to have increased in the wake of the Brexit vote in the United Kingdom.

The FTSE/NAREIT All REIT Index had a total return of 3.9 percent in July, while the S&P 500 Index gained 3.7 percent. For the year through the end of July, the total return of the FTSE/NAREIT All REIT Index was 18.1 percent, while the S&P 500 Index posted a total return of 7.7 percent. The yield on the 10-year Treasury note dropped 0.8 percent in the first seven months of 2016.

“Although [Brexit] certainly has damaged investors in the U.K., especially in U.K. real estate markets, and it seems to have damaged investors in the rest of Europe in both stock and real estate markets, it had no negative effect—and maybe even a positive effect—for investors in the U.S.,” Case said. “Especially investors in U.S. REITs.”

In general, Case noted that economic conditions have improved for real estate investors in the U.S.

“We’ve seen steady news about the macroeconomic situation,” he said. “Real estate investors don’t want the kind of roaring growth that causes people to pop champagne corks. What they want is steady, predictable growth that looks like it’s going to continue for a long time.”
Case also pointed out that lower than normal construction levels are boosting the real estate market.

“It looks like it’s going to be quite some time before construction gets even back to normal, much less above normal,” he said.

“There was strength across much of the REIT industry,” Case said. “Investors are looking at the real estate market cycle as a whole, as opposed to what effect it’s going to have on individual property types."