3 Reasons to own listed REITs today

3 Reasons to own listed REITs today

6 minute read

April 2024

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We see compelling evidence to own listed real estate in the current environment.

1. REITs have historically performed well following the end of Fed rate hikes

REITs perform well after a Fed pivot and should be part of a long-term asset allocation. Tactical opportunities may emerge as rate/growth expectations remain volatile.

Average U.S. REITs 12-month forward returns following end of Fed rate hiking(1)

2. Moderating supply is supportive of rent growth

Fundamentals remain resilient. Demand is healthy, albeit decelerating, while supply is curtailed due to tighter financial conditions.

Construction starts by sector (% of inventory)
January 2015 – December 2023
Construction starts by sector (% of inventory)

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3. REITS are undervalued compared to equities

Valuations relative to the broader equity market are meaningfully below the historical median. Attractively priced equity and REITs’ access to the unsecured bond market could allow them to take advantage of external growth opportunities.

U.S. real estate vs. U.S. equities earning multiple spreads1
January 2005 – February 2024
U.S. real estate vs. U.S. equities earning multiple spreads(1)

FURTHER READING

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Capital Market Assumptions: Expectations for the next 10 years amid a generational change for markets

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We expect higher fixed income and real asset returns alongside lower U.S. equity returns for the next decade.

REITs’ rare earnings multiple discount to stocks is historically compelling

REITs’ rare earnings multiple discount to stocks is historically compelling

June 2024 | 10 mins

U.S. equities have outperformed U.S. listed REITs substantially over the past few years. But history suggests that the resulting valuation gap between equities and REITs indicates a likely reversal.

The active advantage in listed REITs

The active advantage in listed REITs

May 2024 | 14 mins

The diversity and complexity of the real estate market give specialist active managers a wide field of opportunities to potentially enhance returns.

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