It's A REIT Party! | Commercial Real Estate Finance

As of last week, property stocks are back on top. Since May 31, ?the total return of the?FTSE NAREIT All Equity REITs index was up 14.1%. The?Standard & Poor?s 500-stock index rose 7.8% and the?Dow Jones Industrial Average rose 9.8% during the first five months,? according to?WSJ.com. Commercial real estate seems to be a strong industry despite the mediocre economic situation. That sure sounds good to me, and it probably does to you too.

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REITs have been outpacing the broader stock market for two years and had previously done so for the first two months of 2011. However, unrest in March caused commercial real estate profits to be ?clipped.? Luckily, April proved to be a much more exciting month. The unemployment picture started to look a little better and investors were again eager to put their money into REITs.

?REITs are doing so well because the value of commercial real estate continues to rise,? said Jim Sullivan, a managing director of REIT research at?Green Street Advisors. ?According to the?Green Street?s Commercial Property Price Index, which tracks mostly higher-end properties owned by 47 REITs with roughly $400 billion in assets, property values have increased 45% since the 2009 bottom.?

This all appears to be pretty great. However, there is still that pesky problem of unemployment that seemed to have been getting better a couple months ago. Now, we are back around 9.1% unemployment and President Obama is trying his best to quell our fears, but things are not really getting any better. It?s a hard pill to swallow, but it sure looks like we are in this ?recession? for the long haul. If this is the case then what affect will this have on our REIT party? I know that I definitely want to keep it going, but sometimes you plan a great BBQ with all your friends, yet it won?t stop raining.

Only time will tell, but I find it hard to imagine that REITs will continue to see the same growth that we have been enjoying. Unemployment plays a huge role in every facet of life, especially commercial real estate, and, just like in March, investors might again be wary of putting their money into REITs. Although the history for REIT success is there, investors can definitely be a little fickle when the economy is not particularly successful.

Do you think REITs will continue to show growth in the face of increasing unemployment?

Source article by A.D. Pruitt from the Wall Street Journal at?WSJ.com Graph from the Wall Street Journal, at?WSJ.com

Source: http://llenrock.com/blog/reit-party-2/

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