What REITs Tell Us About The Market's Direction

Marc Halle

NEW YORK–For the last two months REITs have begun to outperform the larger US equities market, after being  pummelled by investors for two years. Today, despite the previous two months, REITs’ story line is well entrenched: they are out of step with the direct real estate market and are so cheaply priced that they are ripe for acquisition. But besides their acquisition potential, is there another lesson to be drawn from their two-year journey? Yes, according to Marc Halle, head of Global Real Estate Securities at PGIM Real Estate, which is this: REITs are good forecasters of the direction of real estate values and they are indicating that valuations will eventually drop in the private market.

“Directionally, what REITs are telling us is that real estate values may come down a little because of the increase in cap rates and because of the increase in the cost of capital,” he tells GlobeSt.com.