CoStar Group: Investment Climate Highly Favorable for REITs

by: Brad Case

A report published last week by the CoStar Group focuses on REITs' acquisition activity, which investors believe will generate strong earnings growth going forward:

REITs have been some of the most active players in the CRE investment market in 2010. What’s more, REITs also make up a substantial portion of the widely discussed ‘capital on the sideline’ ready to pounce on commercial real estate investment opportunities as they arise—seemingly enjoying the best of both worlds.

Here are some of the themes that the article focuses on:

Deal flow is growing as more product is coming to market.


Money is cheap from an interest-rate perspective, and hence the ability to raise new equity in the capital markets is strong as investors look to REITs for growth.


The current price of properties on the market represents a deep discount to replacement costs.

CoStar’s Mark Fitzgerald singles out the retail and hotel sectors as the ones that “should benefit the most from public REIT capital.” There are 27 publicly traded REITs in the retail sector and 13 in the hotel (lodging) sector; the iShares FTSE NAREIT Retail Capped ETF (NYSEARCA:RTL) and iShares FTSE NAREIT Retail Index Fund both focus on the retail sector.

The article also specifically discusses ProLogis (NYSE:PLD), Glimcher Realty Trust (GRT), Host Hotels & Resorts (NYSE:HST), Boston Properties (NYSE:BXP), and Kilroy Realty (NYSE:KRC).

Disclosure: Author is long Vanguard REIT Index Fund and ING Real Estate Fund

Disclaimer: The opinions expressed in this post are my own and do not necessarily reflect those of the National Association of Real Estate Investment Trusts ((NAREIT)). Neither I nor NAREIT are acting as an investment advisor, investment fiduciary, broker, dealer or other market participant, nor is any offer or solicitation to buy or sell any security investment being made. This information is solely educational in nature and not intended to serve as the primary basis for any investment decision.