The Global Future Forecast and Trends of REIT Industry (2024)

FAQs

The Global Future Forecast and Trends of REIT Industry? ›

The Global Real Estate Investment Trust (REIT) market is anticipated to reach USD 111.98 Billion by 2023, growing at a CAGR of 12.85% from 2024 to 2031, and is expected to hit USD 231.29 Billion by 2031.

REIT Market Size 2024-2028

The REIT market size is estimated to grow by USD 350.2 billion, at a CAGR of 2.87% between 2023 and 2028. The increase in global demand for warehousing and storage facilities is driven by the growth of e-commerce and the need for efficient logistics solutions.

Consensus estimates for US equity real estate investment trusts forecast a median 1.1% year-over-year drop in funds from operations per share for the second quarter of 2024.

Fundamentals remain solid-to-strong across nearly every property sector, with the notable exception of coastal office properties. Public REITs reported that "same-store" property-level income, on average, was 14.0% above pre-pandemic levels in the first quarter.

With capitalization (cap) rate spreads remaining wide, there is likely more fuel in the tank for REIT outperformance in 2024. REIT occupancy rate and pricing advantages have combined to suggest that REITs offer more for less and present an opportunity for real estate investors.

The FTSE Nareit All Equity index, consisting of REITs that exclude mortgages, generated a 15.9% annualized return during recessions and 22.7% in the year following the end of a downturn, according to the National Association of Real Estate Investment Trusts.

But with the Fed signaling a potential pause on rate hikes, the time for a recovery in REITs may finally be near. And if investors look beyond negative headlines on interest rates and empty office buildings, there are actually plenty of opportunities with strong fundamentals to be found.

After lagging equities the past two years, REITs offer an attractive investment opportunity in 2024. The headwind of higher bond yields and central bank rate hikes is likely to abate and may turn into a tailwind if our view about an impending economic slowdown and decelerating inflation trends is correct.

By law, REITs must distribute at least 90% of their taxable income to shareholders. This means most dividends investors receive are taxed as ordinary income at their marginal tax rates rather than lower qualified dividend rates. Any profit is subject to capital gains tax when investors sell REIT shares.

There are three key reasons to invest in listed REITs right now, starting with the fact that REITs have outperformed stocks and bonds when yields and growth move lower. Demand is healthy while supply is constrained, and REIT valuations relative to the broader equity market are meaningfully below the historical median.

What are the top 5 largest REIT? ›

The five largest REITs in the United States are: American Tower Corporation, Prologis, Crown Castle International, Simon Property Group and Weyerhaeuser.

Can You Lose Money on a REIT? As with any investment, there is always a risk of loss. Publicly traded REITs have the particular risk of losing value as interest rates rise, which typically sends investment capital into bonds.

When investing only in REITs, individuals incur more risk than when they are part of a diversified portfolio. REITs can be sensitive to interest rates and may not be as tax-friendly as other investments.

KEY TAKEAWAYS

Public REIT market cap grew 17.6% annually from 1990-2021 to $1.75 trillion. REITs paid $92.3 billion in dividends in 2021 and support over 3 million jobs. Small-cap REITs outperformed with +8.59% return in June 2023. Infrastructure and office were the worst performing sectors YTD 2023.

REITs can provide diversification benefits because they tend to follow the real estate cycle, which typically lasts a decade or more, whereas bond- and stock-market cycles typically last an average of roughly 5.75 years. REITs can serve as an effective hedge against rising inflation rates.

FALLING REAL YIELDS MAY SPARK REIT RALLY

With real yields appearing to have peaked in late 2023, prospects of falling interest costs and lower discount rates may provide meaningful tailwinds for the capital intensive, long-duration REIT market.

There are three key reasons to invest in listed REITs right now, starting with the fact that REITs have outperformed stocks and bonds when yields and growth move lower. Demand is healthy while supply is constrained, and REIT valuations relative to the broader equity market are meaningfully below the historical median.

REITs deliver diversification for your portfolio, potentially generate steady income through dividends, and give you exposure to a range of properties. REITs can also serve as a hedge against inflation and have historically delivered competitive long-term returns.