REITs an Attractive Investment, According to Portfolio Manager

Steve Brown, senior portfolio manager with American Century Investments, joined REIT.com for a video interview in Chicago at REITWeek 2013: NAREIT’s Investor Forum.

Brown talked about the particular REIT sectors that are currently appealing to his company.

“We like the hotel REITs, the mall REITs and the industrial REITs,” he said. “What we think will happen is that we’ve passed the loan interest rates. We’ll probably have higher rates, better economic growth in the second half of 2013, as well as a little more concern about inflation. So, these REITs that have shorter lease types, such as hotel, industrial and mall sectors, should perform pretty well in the second half of 2013.”

Brown shared his opinion regarding the potential for REITs to continue to grow in the future.

“While REITs have done well for investors over the last three or four years, what we see today is very good fundamentals in the United States for commercial real estate,” he said. “We see demand growth of about 2 percent and supply growth of 1 percent. So, anytime you have demand greater than supply, that’s a good fundamental picture, and I think that makes REITs an attractive investment over the next 12 to 24 months.”

Brown discussed the key story he will be following in the second half of the year.

“We continue to watch the monthly employment reports come out, because if we start to trend at the 175,000 to 200,000 jobs a month, I think that’s really all clear for the economy,” he said. “Then, you really want to be in the property types that will benefit from an expanding U.S. economy that’s growing on its own, as opposed to being supported by the Federal Reserve.”

Brown further described the sectors that would most benefit from a growing economy.

“It would be the big three I just mentioned —hotels, malls and industrial. But if we did ramp up to 175,000 to 200,000 jobs a month, I think there would be a second wind for the apartment sector.”