Nareit's REIT Report Podcast

Current volatility within the REIT market is creating the potential for opportunistic investment, particularly among well-capitalized companies with seasoned management teams, said Jay Olander, managing partner of Cornerstone Realty Advisors.Olander has served in senior REIT management positions for over 25 years. Most recently, he oversaw the $1.9 billion sale in 2016 of Landmark Apartment Trust, Inc., an apartment REIT.Speaking on the REIT Report, Olander compared current market conditions to those of previous cycles, concluding that “over time, we do expect that the investment market will return, just as we’ve seen in the past.”

A slowing of payroll employment in September raises concerns over the pace of the economic recovery in the months ahead, Nareit Senior Economist Calvin Schnure said.Speaking Oct. 5 on the REIT Report, Schnure noted that despite the 661,000 rise in payroll employment in September, “the report had more warning signs than good news.”The increase came in below market expectations, and while the unemployment rate dropped to 7.9%, a big part of that was because people stopped looking for jobs—especially women and minorities.

The biggest story to emerge from the past six months has been the bounce-back in certain retail sectors. Funari noted that rent collection for free standing retail started out at 73% and by September was almost at 95% of typical rent collected. Shopping centers started the pandemic at slightly over 50% and were at 82% of typical rent collection by September, she noted.Nareit decided to end its regularly scheduled rent collection survey this month, Funari explained, because most property sectors had stabilized by July and the remaining sectors seemed to be heading in that direction through September.Furthermore, rent collection is only one piece of REIT operations, Funari said. “It says a lot about tenant health, which was useful information, especially early in the pandemic, but as we’ve stabilized over time, we’re just not learning new information about the REITs themselves.”

The commercial real estate industry should use the current environment as a catalyst to future-proof assets for the changing ways in which they will be used over the coming decade, according to Nikki Greenberg, founder and CEO of Real Estate of the Future.Speaking on the REIT Report, Greenberg noted that while the ways we live and work have rapidly changed, the spaces we occupy have not. “We really need to use this as an opportunity to become future ready as we look toward 2030,” she said.“Across the board, all sectors do need to do better,” Greenberg said. She stressed the importance of “a different way of thinking” that looks at the full scope of challenges ahead. “You have to have people in the room who don’t think like you…the traditional way of working and owning and operating space, that’s not going to serve us in the short term and it’s not going to serve us very well in the longer term either,” she said.

Most of the current economic news is pointing to an ongoing recovery, including for commercial real estate fundamentals, according to Nareit Senior Economist Calvin Schnure.Speaking Sept. 14th on the Nareit REIT Report, Schnure noted that August retail sales data, to be reported on Wednesday, are expected to show a 1% increase. “Most aspects of retail sales actually are above pre-pandemic levels,” he said.At the same time, the Job Openings and Labor Turnover Survey (JOLTS) showed that job openings rose 10% in July and are getting close to the range they were in late last year, Schnure said. Layoffs, meanwhile, have been below pre-pandemic rates during May, June, and July.

Against a backdrop of overall positive economic momentum, the performance gap between property sectors is likely to expand during the second half of the year, according to Carly Tripp, chief investment officer for the Americas at Nuveen Real Estate.Speaking on the REIT Report, Tripp also discussed how to ideally go about positioning a portfolio amidst the current level of uncertainty.“It’s really important to be disciplined and patient during times of uncertainty in order to not sacrifice long-term results or short-term gains,” Tripp said.

August employment data released last week shows that the economic recovery remains on track, despite worries about a potential rebound in the coronavirus, according to Nareit Senior Economist Calvin Schnure.Employers hired back more than a million workers last month, with total payroll employment rising by 1.4 million. This number did include temporary workers hired for the Census, Schnure pointed out, but private payrolls were also up 1 million. The unemployment rate also dropped more than expected, to 8.4%.At the same time, total employment is 11.5 million below where it was in February, Schnure noted, and less than half of the February to April decline in employment has been reversed at this point.

The appeal of attractive urban gathering places has remained intact throughout the coronavirus crisis, despite reports of preferences shifting toward less dense, suburban locations, says Robin Zeigler, EVP and COO at Cedar Realty Trust, Inc. (NYSE: CDR).“One of the things we’ve seen during this period is that people do still have a desire to gather and to be in certain types of environments. The desire to have outdoor dining, the desire to go to a bar is still evident…people want good urban gathering places,” Zeigler told the REIT Report.Cedar Realty owns a portfolio of predominantly grocery-anchored shopping centers in high-density urban markets from Washington, D.C. to Boston.

Continued signs of resilience in the economy, even as the coronavirus remains active, point to a positive environment for commercial real estate going forward, according to Nareit Senior Economist Calvin Schnure.Speaking Aug. 31 on the REIT Report, Schnure noted that new home sales in July rose to their highest level since 2006. Durable goods orders rose more than expected, and industrial production and business investment are on track to return to pre-pandemic levels, he added. Consumer spending also rose nearly 2% in July.

While COVID-19 has created short-term disruption and altered business and leisure routines, trends prevalent today may not necessarily remain in place for the longer term, according to Bernhard Krieg, managing director and portfolio manager on the real estate equities team for Brookfield’s Public Securities Group.Krieg noted that a valuation shift between growth and value-oriented stocks was already evident before the pandemic and has diverged further since then. However, “to a certain degree these trends are not permanent, in our view,” he said.“It’s easy sometimes to extrapolate the most recent trends and think they will not change materially…It’s our view that we are going to revert back to normal and investing globally gives us some important perspective on some of the markets where the pandemic has subsided,” Krieg said.