Seeing the Big Picture

Overview: REITs have outperformed over the past 20 years, but will broader market, demographic and economic factors allow those results to hold over the next two decades? There is a cyclical nature and long-term strategy with investing in real estate stocks that investors can lose sight of when company performance dips over a short-term period. Like many industries, demographic factors are one of the most important predictors of future performance—and fortunately for REIT investors, demographics appear to be in the industry's favor. All the demographic factors are extraordinarily favorable. Two of the biggest influences on real estate are pricing relative to other asset classes and access to capital markets. Real estate is often labeled a lagging indicator of the broader market and other industries. Thus, much of what happens in the real estate industry going forward will be dictated by how fast and completely the overall economy recovers. Those pundits that forecast a slow recovery with corporate earnings continuing to struggle see problems for the property markets in terms of increasing—or even maintaining—occupancy rates.

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Format: HTML | Date: Jan 2003 | Pages: 1