John Worth, Nareit executive vice president, research and investor outreach, was a guest on the latest episode of the REIT Report.
Worth discussed some of the key features of Nareit’s newly-published 2024 Mid-Year Report.
Worth noted that despite REITs underperforming the broader stock market this year, they remain able to navigate the current period of higher interest rates.
“REITs’ operational performance has been very solid. We've continued to see high occupancy rates in the major property types and we've seen positive NOI and FFO growth. We're also seeing the continuation of really disciplined balance sheets,” Worth said.
Worth noted that there have also been signs in some marketplaces that buyers and sellers are getting closer in terms of the bid-ask spread. “We think that's a real positive for REIT growth for the remainder of 2024 and into 2025.”
At the same time, public and private real estate valuations are still divergent. “As those markets come back together, we think that has historically been a good time for REITs,” he said. “What we've seen in this cycle has been a much slower, more measured approach to that valuation change on the private side, although it is taking place slowly but steadily. And we've started to see some recovery.”
Worth also discussed the role of active fund managers in the REIT space. “Active management in REITs has actually generated alpha over the long term,” he said. He also pointed to the growing importance of new and emerging REIT property sectors in the actively managed REIT environment.
Worth also discussed global REIT returns and whether regional differences have emerged. He said there has been less divergence this year than in past years.