REITS May Be Poised for Rebound, Hunt for Real Estate Investment Talent Heats Up
Real estate investment trusts (REITs) had a sobering 2007. The National Association of Real Estate Investment Trusts’ All REIT Index fell 17.8% last year. Looking ahead however, many analysts say that REITs are not only prepared to withstand volatility in 2008, but many of them are also ripe for a rebound.
Once a rarity outside the U.S., more countries are entering the REIT market, giving investors a chance to take advantage of buying opportunities in property markets around the world. New research also suggests that REITs offer stability. Now, analysts say investors are seeing opportunities in some select REIT property sectors. According to executive recruiting firm, A.E. Feldman, real estate jobs for investment professionals are opening up. Demand is surging for analysts, CFOs as well as asset and portfolio managers.
A REIT is a corporation that that owns and usually manages income-producing real estate property such as apartments, offices and industrial space. The publicly traded companies pay out at least 90% of their income in dividends, have at least 100 shareholders and invest at least 75% of their total assets in real estate.
The U.S. was the first to establish REITs back in 1960. Now, there are at least 20 countries that allow REIT-like investment vehicles. Both Germany and the United Kingdom recently finalized REIT legislation. Italy, Finland, Spain, China, and India are also currently considering corporate REIT structures.
REITs add diversification, while also offering investors the potential for long-term price appreciation. Now, new research also suggests that REITs also offer stability. A study of 17 million portfolios by the National Association of Real Estate Investment Trusts shows that in the long-term, REITs improve returns and reduce volatility, according to a report in the New York Daily News. One reason behind the trend is that REITs have only a 35% correlation with the stock market.
So are REITs really ready for a rebound? Some say real estate investors are poised to capitalize on the fear that’s in the marketplace. The L.A. Times quotes Morningstar Equity Analyst, Jeremy Glaser, as saying, “Our strategy is to try to buy things at a discount to what we think they’re worth. And there are some excellent REITs that are selling at a pretty deep discount to their asset values.”
More specifically, the WSJ reports that Industrial REITs may benefit from global trade, while healthcare REITs might see gains stemming from the growing number of aging Americans. Apartment REITs may also benefit from the housing market slowdown as would-be buyers decide to rent instead.
