REITs: Forces aligned for growth in 2022 (Cohen & Steers) 24 March 2022
REITs in 2022 appear well positioned to benefit from a sustained demand recovery, the inflation-hedging characteristics of real estate and attractive relative valuations.
Key takeaways:
- We believe a strengthening economy should provide a healthy backdrop for many property types.
- Real estate has historically performed well in inflationary environments despite potential interest rate increases.
- REITs remain attractively valued compared with equities, suggesting room to grow.
Strong fundamentals supporting REITs
The global economic rebound of 2021, fueled by fiscal and monetary stimulus, economic reopenings and strong consumer spending, should provide a solid foundation for global real estate securities in 2022.
That said, supply-chain constraints and wage increases could temper growth and keep upward pressure on inflation, leading to rising interest rates. But while sharp increases in interest rates may unsettle markets in the near term, the direction of the economy and job growth tend to have a greater impact on REIT returns than rising rates.
In fact, an expanding economy typically drives stronger demand, which often leads to higher occupancy levels, giving landlords greater negotiating leverage to raise rents. Rising rents, in turn, have the potential to generate higher property cash flows, distributions and property values.
This report was originally published in https://www.cohenandsteers.
