Real Estate Journal Online

Real Estate Investment Trusts (REITs) have been one of the soundest forms of investment in the past few years. These trusts, which are essentially companies that buy, develop, manage and sell real estate assets for their investors, have had the benefit of lots of capital in a buyers’ market over the past few years[1]. In fact, some have had trouble finding an arena in which to spend it! However, as the real estate market struggled to make a sluggish recovery, many experts had predicted that REIT growth would slow as other sectors heated up – although no one disputes that they are a great investment vehicle. However, thus far, that growth has not diminished in speed as expected. “REITs are benefiting from the strengthening economy more than other investments,” explains Brad Case, vice president of research and industry information for the National Association of Real Estate Investment Trusts.

The question for many analysts, however, is whether or not this continued dramatic growth is actually a good thing. While Case, not surprisingly, calls fears of a bubble “misguided,” other investors warn that the growth could be the precursor to an “overheated sector”[2]. Case dismisses this fear, pointing out that REITs were hit much harder by the liquidity crisis and have now fully recovered thanks to better access to capital that has been shoring up their balance sheets since 2009.

It seems like many analysts are fearful of any positive growth right now and are quick to call any type of recovery a potential bubble. Do you think that an REIT bubble is a real threat, or are economists just “crying wolf?”

Thank you for reading REJournalOnline’s Commercial Real Estate Investment Letter!

Let us know where you think bubbles are forming in the market in the space below.

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[1] http://www.reitnet.com/reits101/whatis.phtml

[2] http://www.globest.com/news/1885_1885/washington/308664-1.html?ET=globest:e25549:482976a:&st=email