Office Sector Focused on Limited Spending

"Blend, extend and don't spend" was one of the primary mantras of office REITs during the economic downturn, according to John Guinee, managing director with Stifel Nicolaus.

In an interview with REIT.com 
on June 11 during REITWeek 2012: NAREIT's Investor Forum at the New York Hilton, Guinee said it's important for office REITs to keep their space full without spending a lot of capital dollars to do so.

"The second strategy would be to sell vacancies," he said. "A number of companies have done that very effectively."

Guinee added that the third strategy is to anticipate the office markets that are going to be in recovery mode and buy opportunistically in those particular markets.

Relative to recent consolidation in the industrial sector, primarily the 2011 merger to form Prologis (NYSE: PLD), Guinee said he does not expect that pattern to keep up.

"We do not expect that trend to continue in industrial, nor most other property types. The reason for that is access to capital, both public and private debt and public and private equity, is very advantageous for the public companies to use relative to private companies," Guinee said.

This results in management becoming more interested in being a public company rather than a private company, according to Guinee.

Guinee used Prologis as an example of one U.S. REIT that is expanding internationally. He said he continues to see significant levels of development from Prologis.

"There are two reasons that you develop," he said. "One is attractive yields and then the other is to monetize your land. We believe Prologis is being very aggressive in that avenue."

In regards to the other REITs based in the United States, Guinee said most remain interested in continuing development domestically for both attractive yields and to monetize the land.

"We do not see those other REITs going global," he said.