- 97% of real estate investors plan to increase their capital allocation to real estate in the next 18 months.
- Why? Because: prices are rising along with NOI growth, the real estate cycle still has more room for growth, the pricing is attractive, and the risk of inflation is rising.
- Our 7.5%-yielding portfolio of undervalued REITs is well-positioned to strive in this environment.
The latest edition of Deloitte’s Commercial Real Estate Outlook has been newly released for 2019, and we find a wealth of information in the report that applies to our REIT investment strategy.
The outlook surveys up to 500 global commercial real estate investors on the factors that will drive their investment decisions in the year ahead. The biggest takeaway for us as REIT investors is that more than 97 percent of those surveyed indicated they would increase their capital allocation to real estate in the next 18 months, despite all the concerns about interest rates, trade tariffs, tax reforms, and Brexit.
It is very interesting because it essentially shows a strong disconnect between:
- Real estate investors who are overwhelmingly bullish; and
- REIT investors who are much more bearish.
On one hand, real estate investors indicate that they plan to increase their allocation to real estate to new all-time highs, while at the same time, REIT investors are increasingly worried and running for the exit – causing the REIT market to drop by about 10% since July 2016:+
Real estate investors see the glass as “half-full” with strong NOI growth on its way and further asset price appreciation potential. REIT investors see it “half-empty” with growing fears over interest rate hikes and other macro events such as trade wars.