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Quarter-End Insights

Sector Outlook -- Real Estate

The macro environment remains favorable toward REITs, but valuations generally appear stretched.

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  • The low interest rate environment provides REITs access to historically cheap debt financing and elevates commercial real estate prices.
  • Slow but steady macroeconomic improvement generally translates into slow and steady increases in demand for commercial real estate space without spurring too much construction or incremental supply.
  • Relative to our long-term expectations, equity REITs appear pricey in general.  

 

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Todd Lukasik does not own shares in any of the securities mentioned above. Find out about Morningstar’s editorial policies.