Susan Persin, senior managing director at Trepp LLC, joined REIT.com for a video interview during REITWeek 2014: NAREIT’s Investor Forum, held in New York.
With REITs outperforming the broader market so far this year, Persin was asked whether she expects fundamentals to support the market for the rest of 2014.
“I think fundamentals are very strong right now for pretty much all property types,” responded Persin, noting that job growth has kept demand for commercial space healthy . “I think there are some concerns about supply in certain sectors, but so far that seems to be limited.”
Persin also commented on which REIT segments have had the strongest performance this year compared with 2013 and which haven’t met expectations. She singled the apartment and health care sectors as peak performers.
While there was concern last year about overbuilding of apartments, “I think demand has been stronger than expected so far in 2014, given some concerns in the single-family market about affordability,” she noted. As a result, supply has become less of an issue, with the exception of high-end luxury apartments, Persin added.
The health care sector, meanwhile, started out strong in 2013, but it weakened late in the year amid concerns about implementation of the Affordable Care Act, Persin said.
“Those concerns have been alleviated, and things have been worked out to a greater extent,” Persin commented. “I think health care has really rebounded so far in 2014.”
In terms of underperformers, timber REITs went from a very strong performance last year to one of the weaker sectors this year, Persin observed.
“ I think that’s because of the affordability issue with single-family homes and concerns about what the future of homebuilding is,” she said. Timber REITs have also been impacted by concerns about exports to China, according to Persin.
Persin also discussed the recent pick-up in initial public offering (IPO) activity following a slow start in the beginning of the year.
“I think the strong returns are the first thing behind the revival,” she explained. “I think that companies that are looking to go public are looking for a strong market.”
Additionally, companies are discovering that REITs enjoy lower cost of capital, according to Persin.