Nareit Economists Watching Real Estate Cycle, Tax Changes in 2018

Changes to the tax code and the durability of the real estate cycle are among the key storylines to follow for REITs and real estate investment in 2018, according to economists from Nareit’s Research & Investor Outreach team.

Senior Vice President for Research and Industry Information Brad Case said he’s expecting to see “reversion to the mean” in the investment markets that should benefit REIT investors. Case attributed the REIT industry’s underperformance of the broader stock market in 2017 in part to the investment capital flowing into large-cap technology stocks, but he noted that REITs should make up some of that lost ground in the coming year.

Senior Vice President for Research and Economic Analysis Calvin Schnure pointed to the durability of the real estate cycle as a key story to watch. Schnure downplayed concerns over the length of the cycle, which is approaching 10 years. “Real estate cycles don’t die of old age,” he said. He did say the potential for oversupply from new construction bears watching.

Senior Vice President for Research and Investor Outreach John Worth said he’ll be tracking how investors react to the changes in the newly passed tax bill. He noted that the tax rate on REIT dividends is decreasing from 39.6 percent to 29.6 percent at the top marginal. “That’s important because that can dramatically increase investors’ rate of return on REIT investments,” Worth said.