Alexandra Thompson

Equity REITs raised $3.4 billion in the third quarter of 2019 through at-the-market programs, just shy of a record high.

REITs issued $19.2 billion in secondary offerings of common equity during the first half of 2019, which is more than they raised during the entire year of 2018.

Nareit completed its third annual round in estimating the size of U.S. commercial real estate, and find that the total dollar value in 2018 was $16.0 trillion, with lower and upper bounds of this estimate of $14.4 to $17.0 trillion.

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.

Commercial property prices edged higher in 2018, increasing 1.8 percent over one year earlier.

When discussing the outlook for retail, it’s important to keep in mind the distinction between the impact on retail stores and what it means for the owners of retail properties, including REITs.

A comparison of recent trends of the P/E ratio for the S&P 500 to the price-to-FFO ratio for REITs shows a contrasting risk/reward tradeoff between the broad equity market and REITs.

The economy is enjoying above-trend growth, with some boost from last year’s tax cuts, which supports demand for nearly all types of commercial real estate.

Excessive debt growth is a warning sign of an overheating real estate sector. Growth of commercial mortgage debt has been modest, however, at only half the pace of the prior cycle. Banks have been the mainstay of lending, but life insurers have shown increased appetite for commercial mortgages, and net issuance of CMBS turned positive in the second quarter. 

Recently, office properties in many secondary markets have enjoyed greater demand and rising occupancy rates relative to office markets in gateway cities. 

The movement towards more sustainable practices continues with commercial real estate, and REITs are helping lead the charge. 

The $64 million question in commercial real estate today is whether or not the sector is past its peak and headed for a slowdown.