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U.S. REIT market, Americas Directorate Kageyama Michiko greet crucial stage in the rising interest rates

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The Dow Jones Industrial Average fall continued significantly against the backdrop of uncertainty about the future of the world economy. REIT performance even after the turn of the year following the U.S. stock market correction is still compared to a year ago, at 18% higher levels.

U.S. Real Estate Investment Trusts sector is suffering from sluggish price/earnings growth. Last year, the annual change in value for the REIT index that reflects typical ” FTSE · NAREIT · All REIT Index ” sank in negative territory for the first time in five years. That said the recovery has remained at a level 13% lower compared with the most recent highs attached to May last year.

“Aspects of monetary easing support the REIT market is over”, Cantor Fitzgerald’s, David Toti said.

The REIT market has attracted investors as an asset that can be secured investment gains relatively high compared with low returns in government bonds since 2009, and the ultra-low interest rates that followed. But in May last year, the upward trend in REIT prices , which lasted about four years have collapsed in anticipation of a rise in U.S. long-term interest rates rise, Toti said.

There is uneasiness in growth of income from real estate management in the core property business. This is because the actual demand for the U.S. commercial real estate is still sluggish.

Philip Blumberg, CEO of Blumberg Capital Partners, a leading US investment property company: “The U.S. economy is not in strong enough recovery to substantially increase the demand for commercial space”.

Looking around the U.S. real estate market, the housing market is recovering well. Even in some commercial real estate markets, rent or value of properties are soaring in some areas, such as San Francisco and New York, fueling overheating locally. But when viewing the United States on a national scale, total market recovery is delayed as compared to the residential real estate market. Job growth is key to commercial and office sector expansion. However, despite strong corporate earnings, job growth is still slowly recovering due to previous corporate cutbacks and a lagging rate of new hirings.

Nonetheless, Philip Blumberg is confident of recovery and growth in the office sector nationally, as the American economy continues to strengthen.

ProLogis, which operates and manages logistics facilities said “investors begin to check the growth potential of REIT companies”.

Momentum of surplus money in-flows have pushed up the REIT prices until last spring is too weakened whether you can return to an upward trend again REIT prices by showing investors ability to produce. Revenue later next week, major REITs such as Boston Properties is preparing to announce the October-December period financial results which means that face a moment of truth.

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