Calvin Schnure

New indices introduced by Green Street allow us for the first time to compare property price performance to total returns for property types outside of the traditional core REIT sectors.

The recovery in housing markets has generated concerns among investors in apartment properties that a rebound in homeownership could undermine the demand for apartments. Nothing could be further from the truth!

Net operating income (NOI) of listed REITs rose nearly 50 percent over the past four years. The steady increases in same-store NOI at a pace above the inflation rate should continue to drive earnings, and valuations, upward in the future.

There are a multitude of signs that REIT performance will likely remain strong in the months ahead.

Are low cap rates flashing a signal that speculative pricing is setting the market up for a correction? 

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.

REITs have provided investors solid returns over the years, despite short-term zigs and zags along the way, in part because of structural features of the REIT model.

REITs have outperformed the S&P 500 in recent months, with a cumulative total return of 14.6 percent since their low point in early February.

Mergers and acquisitions involving REITs have been in the spotlight in recent months. The flurry of proposed deals announced in just the first half of this year put the market on pace to set a new record for merger activity in 2018.

Commercial property prices in April were 9.1 percent higher than one year earlier, according to the CoStar Commercial Repeat Sales Index

Current REIT fundamentals and equity market conditions suggest that investing in REITs will likely continue to have such benefits in the period ahead.

Total REIT FFO was 3.6 percent higher than in the fourth quarter of 2017 and 6.0 percent above over one year ago.