Capital Markets

REIT share prices have often responded negatively to rising interest rates, at least since 2013. Is this warranted by the outlook for their future earnings?

For REIT investors 2017 turned out to be a very normal year—but that was a huge disappointment given the “irrational exuberance” that investors in some other parts of the stock market enjoyed. So how can we develop empirically-based REIT return expectations for 2018?

Concern is growing among some investors that tight labor markets may trigger an increase in price inflation. 

The macroeconomy and real estate markets had a good performance in 2017. That may well continue into 2018, but there are several risks that might cause a change in the outlook.

Cap rates have been holding their ground, even as interest rates move higher. The resilience of pricing in the real estate sector should not be surprising, however, given the strength in the fundamentals that support demand for commercial space.