The Secret Upside of REITs

WASHINGTON, DC-Last month, REITs continued their recent trend of underperforming the general equity market while holding onto their gains for the year, as new figures from NAREIT show. However, the fundamentals for these securities are solid and investors looking for upside can still find some, Calvin Schnure, vice president of Research and Industry Information at NAREIT, tells GlobeSt.com. In particular, the relatively skimpy supply pipelines in many markets mean that REITs are well positioned to benefit from the improved economy, he says.

“In general, commercial real estate is well positioned in the overall economy,” Schnure says. “The talk of overvaluation comes when prices are compared to REITs’ FFO. On that measure REITs do seem a bit rich. Another positive sign for REITs are their ongoing capital raising endeavors, which have clocked in at $3 billion to $4 billion a month. “That indicates there’s strong demand for these securities.”