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- June 1, 2015: Vol. 2, Number 6

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Cooling Their Heels: After years of strong growth, REITs are expected to perform more modestly in 2015

by Susan Persin

1 Publicly traded REITs have experienced a long bull market, posting positive returns for more than half a decade. Investors have flocked to the sector, attracted by its strong dividend yields in the current low–interest rate environment. At the same time, low interest rates have allowed REITs to borrow money cheaply for expansion. The jury is out for 2015. Healthy job growth is driving demand for all types of real estate. Underlying real estate market supply and demand fundamentals are mostly balanced and improving. Nevertheless, investors are wary about the impact of rising interest rates on REITs and concerned about whether this cycle has run its course. Overall REIT performance has been lackluster so far in 2015, but performance varies by property sector. Self-storage and apartment REITs have performed best in 2015, and investors have pushed up returns for core office REITs. Other sectors, such as timber and lodging, have struggled. REIT managers

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