Low Capex Property Sectors Perform Better Over Time, Green Street Says

Cedrik Lachance, director of REIT research at Green Street Advisors, participated in a video interview at Nareit’s REITworld: 2019 Annual Conference in Los Angeles.

Lachance discussed the work that Green Street has done in recent years on property sector allocation.

“A lot of investors have realized that the sector decision is at least as important as the securities decision that they’re making,” Lachance said. He added that Green Street has determined that low capital expenditure (capex) property sectors tend to provide much better performance over time. “It’s true historically and we think it’s going to be true for the long term as well,” he noted.

Meanwhile, Green Street recently changed its NAV-based pricing model used to arrive at REIT investment decisions. While cosmetic changes have been made in the past, this constitutes a full redevelopment of the model. The results speak for themselves, as Lachance noted that “we’re having one of our best stock picking years.”

Lachance also commented on some of the key investment themes that attract his attention outside of the U.S. He noted that while the main beneficiaries of positive disruption from e-commerce, namely industrial assets, have been priced “quite fairly” in the United States, those assets are still “very attractively priced” in Europe.