- Morningstar's real estate coverage appears fairly valued at current levels.
- We view themes in commercial real estate as generally defensive in nature, with lingering concerns about increasing bond yields associated with future rate hikes.
- Despite these concerns, we continue to focus on underlying performance, which has remained healthy overall, as REITs have been focused on repositioning and strengthening their portfolios, deleveraging, and capital recycling.
- Construction of new property continues as firms look for higher returns; however, this raises questions about oversupply as economic uncertainty remains.
- At current price levels, we see attractive investment opportunities scattered across various asset classes within our REIT coverage. Vornado is trading at a noteworthy discount to our fair value estimate.
U.S. Real Estate Outlook
Contributed by Brad Schwer