Year to date, REITs are outperforming targets, with a little bit of growth in the U.S., which is underpinning some selective demand for space, however there are considerable concerns going into the second half of 2012 due to the economy and the uncertainty around the U.S. election, says David Harris, a REIT Analyst for Imperial Capital, LLC.
“On the investment side, we have very low interest rates, which are underpinning tremendous demand for yield product. We can see that in Treasury bonds of sovereign countries with perceived stability and safety,” he said. “We can see it in high-grade corporate bonds, and we can see it in the high-quality real estate markets.”
Harris has a positive view on Simon Property Group Inc. (SPG), a mall company that offers some relative value and has performed well in the markets. He says Simon Property’s dividend is 11% higher than the prior peak.
“If we look at retail, aside from the growing portion of the market that is taken up through e-commerce and Internet sales, there’s a firm bid from healthy retailers for space in the most productive locations,” Harris said.