REITs Poised to Outperform Private Equity, Stocks This Year
Real Estate Investment Trusts, vehicles that pay out most profits as dividends, are better positioned to weather high interest rates and recession fears than private equity real estate or stocks, according to analysts at Bank of America and CenterSquare Investment Management.
REITs that invest in apartments, industrial properties, retail and self-storage are poised to outperform, according to analysts at Bank of America. Only office REITs are likely to raise recession concerns.
«REITs offer investor portfolios exposure to cash flows generated through long-term leases that can withstand the impact of short-term volatility in economic conditions,» CenterSquare said in its report. «REIT cash flows do not tend to vary year to year, even during recessionary times, like we typically see in equities. As a result, we aren’t seeing the same level of negative earnings revisions in the REIT sector as we are seeing in the S&P 500 more broadly today.»
REIT prices fell 27% over 2022, according to CenterSquare.
Bank of America analysts also highlighted data center, lodging and healthcare REITs as being poised to weather a downturn in the economy.
“Historical data suggests that REIT outperformance versus private real estate and broader equities will extend beyond the recession through the recovery. Looking back through the late 1970s, we find that even though REITs underperformed private real estate in the four quarters before a recession (which we’ve already experienced), REITs outperformed private real estate during and for the four quarters after a recession,” the report reads.
REITs are modeled after mutual funds and pool the capital of numerous investors. While many market-watchers are waiting to see improvements in both
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