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AEW CIO says REIT supply is at historically low levels
AEW Capital Management’s Gina Szymanski said historically low new supply across REIT property sectors could translate into more pricing power for landlords despite cap rates narrowing versus the 10-year Treasury.
AEW Capital Management’s global securities chief investment officer Gina Szymanski said long term investors may be better positioned in the REIT cycle now, arguing that supply pressures across property sectors are unusually low. Speaking to the REIT Report, Szymanski said her firm is “very bullish” because pipelines for new development were pushed down as interest rates rose in 2022 and have since emptied across the board.
Szymanski said the drop in supply should ultimately strengthen landlords’ pricing power, pointing to early signs she described as “green shoots” of increased pricing power. She also noted that the spread between REIT implied cap rates and the 10 year Treasury has halved since the start of the year, but said REITs can still perform if investors emphasize growth focused sectors like senior housing, data centers, and retail.
She further argued that volatility in the REIT market should be viewed as an opportunity for investors rather than only a risk, saying that volatility can create openings for “savvy investors.” Szymanski said investors have historically paid a premium for illiquidity, and suggested that stance should be rethought in the current environment.