Calvin Schnure

FFO of all REITs Declined in Q3, but Firm Fundamentals Point to Future Growth

FFO of all U.S. listed REITs in the third quarter was $14.8 billion, 7.8 percent higher than it was one year earlier, according to the Nareit T-Tracker®. On a quarterly basis, this was a 4.5 percent decline from $15.5 billion in Q2, as several large gains in industry earnings in recent quarters lifted total FFO above the $15 billion mark for the first time ever.

Commercial Property Update: Apartment Markets Led the Way in the Third Quarter

The apartment market led the way among commercial property markets in the third quarter, as robust demand pushed down the national vacancy rate and supported rent growth. Office, retail and industrial property markets each saw some easing of demand growth, leaving vacancy rates flat to up slightly. Rent growth has slowed from the rapid pace enjoyed in 2015 and 2016.

Commercial Property Prices: Froth, or Fundamentals?

Commercial property prices have risen steadily since the beginning of the recovery from the Great Financial Crisis (GFC). Prices through September were nearly 25 percent above the level at the end of 2007, according to the value-weighted CoStar Commercial Repeat Sales Index, while prices of multifamily properties were nearly 50 percent above their end-2007 value.

Senior Housing Occupancy Stable in Q3 Amid Building Boom

The senior housing business is in the midst of a building boom the likes of which we have not seen for a couple of decades. The current construction pipeline is 6.1 percent of the existing stock, according to the National Investment Center for Seniors Housing and Care (NIC), and the wave of new facilities coming on line has raised concerns about the sector’s fundamentals in the quarters and years ahead. Indeed, the new supply has already had some impact on the market, as the occupancy rate of senior housing properties was 88.8 percent in the third quarter.

Data Center REITs: Hosting the Cloud, Here on Earth

One of the more interesting developments over the past decade has been the evolution of how real estate is used by businesses and consumers. There are few sectors that exemplify these changes better than Infrastructure REITs, which own and operate cell towers, and Data Center REITs—which own modern commercial real estate that, paradoxically, is associated with hosting “cloud” computing. Data centers house the servers and network equipment that make modern communications possible, including the Internet and data transmitted by cell phones.

Construction Activity Begins to Slow, Boosting the Outlook for REITs and Real Estate

Has the pipeline of new building construction leveled off and perhaps begun to slow? New data suggest that it has. Rising levels of construction have been a major concern for the outlook for commercial real estate, and the latest information represents a significant turn in the outlook for new supply. REITs and other owners of commercial properties are likely to benefit from a favorable balance of supply and demand in the months ahead.