The Dawn of a New REIT Era?
Real estate investment trusts (REITs) have been hit particularly hard in the current bear market, and commercial real estate fundamentals aren’t expected to improve for years. So why are industry insiders so hopeful?
The past three years have not been kind to REIT investors. The FTSE NAREIT All REIT Total Return Index, which tracks the equity and mortgage REITs, declined 17.83 percent in 2007 and another 37.3 percent in 2008 amid investors’ growing concerns about the financial services industry, the recession, property and stock overvaluation, and growing credit risks. And then, in April, those risks turned into realities. That month, mall REIT General Growth Properties along with 158 of its properties filed for the largest real estate bankruptcy in U.S. history. Investors feared the worst for the REIT industry and fled the market. The FTSE NAREIT All REIT index lost another 39 percent in the first three months of the year alone.
But then &m