The Market Commentary blog on reit.com presents analysis of the macro- and micro-economic fundamentals impacting the REIT and commercial real estate industry. The Nareit economics team offers their commentary on the state of the market, the outlook for commercial real estate and breaking macroeconomic news. The opinions set forth here are solely those of its author(s), and do not necessarily reflect the views of the Nareit or its membership.
Using Market Signals to Predict REIT Outperformance Relative to non-REIT Stocks
It may be surprising to many investors to learn that the same data they may use to value exchange-traded Equity REITs can also be used as a tactical signal for shifting capital between REITs and non-REIT stocks.
Valuing REITs in 2017: Stock Price Premium/Discount to Net Asset Value
The price-to-NAV spread estimated at the end of 2016 suggests that total returns on exchange-traded Equity REITs would average about 13.6% per year over the next five years.
Valuing REITs in 2017: Yield Spreads to Baa Corporates
The yield spread to Baa corporates as of the end of 2016 was in the bullish part of its historic range—and if a wide variety of estimates of the past relationship between spreads and forward-looking returns continues to hold, that currently bullish spread would suggest relatively bullish future total returns for investors in exchange-traded Equity REITs.
Valuing REITs in 2017: Yield Spreads to Treasuries
The yield spread to Treasuries as of the end of 2016 was in the bullish part of its historic range—and if a wide variety of estimates of the past relationship between spreads and forward-looking returns continues to hold, that currently bullish spread would suggest relatively bullish future total returns for investors in exchange-traded Equity REITs.
REIT Volatilities, Sharpe Ratios, Beta & Alpha, and Diversification Benefits as of the Beginning of 2017
The diversification benefits of exchange-traded Equity REITs relative to the non-REIT parts of the stock market have persisted throughout a long period encompassing an almost unfathomly severe downturn—yet they have almost never been stronger than they were as 2016 came to a close.
Positive Signs for REITs: Commercial Real Estate Ends the Year on Solid Note
The data show positive fundamentals entering the New Year. Supply remains in check, and demand growth is sustained, despite some bumps along the way.
REIT Correlations in 2017
While the factors that drive Equity REIT returns are always somewhat different from those driving the returns of non-REIT stocks, the differences between the two equity asset classes—real estate and non-REIT stocks—have rarely been more different than they are as of the start of 2017.
REIT Returns as of the Beginning of 2017
A below-standard year for exchange-traded Equity REITs was still better than their counterparts in the illiquid real estate market, while a stunningly successful year for exchange-traded Mortgage REITs wasn’t all that out of the ordinary.
How Are Equity REITs Positioned for Higher Interest Rates?
How well are stock-exchange listed Equity REITs positioned for the interest rate environment ahead?
Renter Nation? Rising Home Ownership Gives Some Competition to Multifamily REITs
The apartment market has been riding a wave of robust demand and rapidly rising rents for the past several years, pushing multifamily into the leading ranks of commercial real estate. Recently, however, there have been some signs of softening.
Understanding the Term Structure of Correlations
One of the most important investment metrics is the term structure of correlations between any two assets. Correlation measures the degree to which the returns for a pair of assets move together.
The Surprising Comparison of Diversification Benefits from U.S. REITs and International Assets
The bedrock of any investor’s portfolio—no matter how small, no matter how large—is an allocation to the broad U.S. stock market. To go just the tiniest step further, most investors start with a mix of U.S. stocks and U.S. bonds. The question is what to add to that basic portfolio.