Report: REITs Likely to Show Double-Digit Returns in 2013
Low interest rates and positive fundamentals could help real estate investment trusts achieve double-digit returns in 2013 and remain strong through 2016, according to the U.S. Real Estate Strategic Outlook report released March 4 by RREFF Real Estate, the real estate investment arm of Deutsche Bank, HousingWire reported.
The report noted that REITs started showing impressive growth in 2012 and outperformed estimates that year, with a return of around 20 percent, according to data from the National Association of Real Estate Investment Trusts all equity index. Meanwhile the private real estate market returned 11 percent based on the NFI-ODCE Open End Diversified Core Equity measure. 2012 also marked the fourth year that REITs have outperformed Standard & Poor’s 500.
“This positive momentum in the public markets bodes well for private markets, which typically lag REITs by three-to-four quarters,” the RREFF Real Estate report noted, HousingWire reported.
The RREFF report also noted that investors are moving into this hot market because occupancy is recovering and rents continue to rise. REITs also have a favorable cost of capital compared to private real estate investments, and their unsecured debt and equity yields are at record lows. Additionally, the report estimated that investors could expect annual income growth of around 10 percent for the near-term, HousingWire noted.