Market Analysis & Research

The economy is returning to its trend growth after getting a boost from the 2017 tax cuts.

For all the hand-wringing six months ago, the first half of the year turned out pretty well for commercial real estate markets and REITs.

Nareit economist Calvin Schnure reviews the latest data on supply and demand conditions, and vacancy rates and rent growth.

REITs have extended overall debt maturities and reduced leverage over the past decade, and access the commercial paper market from a position of balance sheet strength.   

The occupancy rate at apartment REITs has continued to move to new record highs during this building boom.

REITs have made important changes over the past decade in their overall leverage ratios, as well as the composition and structure of their debt.

Funds from operations of all Equity REITs increased to $15.9 billion in the first quarter, according to the Nareit T-Tracker. Occupancy rates remain near the record highs set last year.

In 2003, the share of TDFs with REIT exposure was only 50%, while in 2018, 97% of them invest in REITs. In fact, 60% of TDFs have a dedicated REIT sleeve within their asset allocation.

Gross domestic product surpassed expectations in the first quarter, and strong job growth in March and April provide a favorable backdrop for demand for leased commercial space.

While correlations between stock markets in the United States and China, and the rest of Asia and Europe have risen as trade disputes have heated up, REITs’ correlations with overseas markets have moved lower.

Rising house prices have raised concerns about whether another speculative bubble is brewing. In today’s housing markets, however, it is a scarcity of housing supply that is pushing up prices.