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REIT portfolio managers cite low supply and secular demand tailwinds
Managers point to low construction starts relative to existing stock and say leasing mark-to-market gains could support earnings growth.
Nareit reports that REITs have outperformed the broader equities market in the first half of the year, but results vary by property sector and company as managers weigh cyclical pressures and longer-term demand shifts, including uncertainty around inflation and rapid advances in AI.
In interviews cited by REIT.com, Todd Kellenberger of Principal Asset Management said many REITs benefit from low supply in multiple markets and secular demand in alternative sectors such as senior housing and data centers. He also highlighted potential positive mark-to-market on leasing activity, which could help drive earnings growth even if macro conditions wobble.
Nareit also points to comments from Sam Wald of Fidelity, who said supply remains low for most property types and cited Dodge Construction Network data showing aggregate construction starts at 1.6% of existing stock. Wald added that Real GDP growth is still running at 2% plus, supporting stronger demand across multiple subsectors.
Matthew Werner of Chilton Capital Management said rising construction costs and a resilient economy, including job growth and retail sales, should keep supply and demand fundamentals improving. He warned that high oil prices tied to the war in Iran have affected the outlook for Federal Reserve policy, potentially shifting expectations toward a rate hike rather than rate cuts.