REITs: Laggards, but for how long?
Rising rates and high expectations have hurt the real estate vehicle, but a few factors could brighten its outlook
March 29, 2017 | by John Waggoner | InvestmentNews.com
In this market, looking for bargains is like looking for a good show on local cable at 2:00 in the morning. While commercial real estate isn’t cheap, REITs offer decent yields — and the chance to buy something that hasn’t participated in the latest bull move.
Even though the Standard & Poor’s 500 stock index has gained 18.3% the past 12 months, the real estate sector has risen just 6.1%, according to Morningstar (MORN). Even in the rally this year, buoyed by the prospects of tax cuts and reduced government regulations, REITs have gained just 0.6%, versus 5.9% for the blue-chip index.
What gives? Traditional reasons for REIT underperformance, for a start. The 10-year Treasury note rose from 1.37% in July last year to 2.61% on March 13. Wall Street often sees REITs, like utility stocks, as bond proxies, and bond prices fall when interest rates rise.
Blue Vault is just what advisors need to size up the different offerings in the nontraded REIT market. Just as importantly, it’s what the industry needs to encourage best practices among REITs.