Real-estate investment trusts (REITs), generally a company that owns and largely enacts income-generating real estate, potentially offer a good investment option now.
That bullish view is from Phocas Financial Corp., an employee-owned registered investment adviser specializing in equity REIT and small-cap value equity investing. Based in Alameda, California, the firm that managed $900 million in assets under management earlier has issued its 2022 first-quarter outlook.
Some of the top predictions the firm provided to BLACK ENTERPRISE include:
- Pricing of industrial and multifamily assets keeps rising. Demand is, too, growing for grocery-anchored shopping centers as valuations become more alluring compared to other real estate sectors.
- Strong demand is expected to persist in the Apartment REIT sector after strong company results in this year’s third quarter and robust October rent growth. Attractive household formation, as well as availability and high pricing of single-family homes, suggest 2022 rent growth above historic averages.
- The firm reported the latest COVID variant is another headwind for office investors. Still, the firm claims that it offers attractive opportunities for patient investors.
- Due to rising wages and labor shortages, the firm expects labor pressure to remain a key concern for Health Care REITs in the fourth quarter of this year and into 2022.
Phocas President Yolanda Foreman stated, “As we continue a 13-year long bull market, cash flows from real estate—including where most of us live, work, shop, and secure our electronic data—deserve attention as an alpha source less correlated to broader equities. Should we really expect the bull market to last another thirteen years?”
James Murray, the firm’s portfolio manager, added, “Entering the first quarter of 2022, investors should try to position their portfolios to offset inflationary effects and the continued geographic shift of workforces. Regarding REITs being able to adjust pricing rapidly to adapt to inflation, interest rate changes, and perceptions of economic health, consider the speed with which prices of hotel rooms can be changed.”
The forecast comes after the Wall Street Journal recently reported rebounding the REIT market. Real estate is an asset class that purportedly holds its value as inflation prevails.
The WSJ disclosed the FTSE Nareit All REITs index— with essentially a market value of $1.4 trillion— offered delivered a full return of 26% as of July 31, 2021. That compared with about 18% for the S&P 500 index.