The Real Deal New York

Real estate stocks are doing better than the S&P 500 for the first time in years

REITs have not outperformed stock market since 2015
December 18, 2018 05:15PM

(Credit: iStock)

Real estate investment trusts  will likely outperform the stock market this year for the first time since 2015, thanks to investors seeking out high-yielding property stocks.

Although much of the stock market has been extremely volatile as of late, real estate stocks appear ready to have another solid year, according to the Wall Street Journal. JPMorgan Chase estimates that REITs will have dividend yields next year of 4 percent, which could continue to be appealing for investors.

The top performers are expected to be multifamily, industrial, health care and office companies with access to the West Coast market.

Some remain skeptical that the recent momentum REITs have will continue, noting that the property-market rally has already been going on for almost 10 years. Green Street Advisors found that values of office and neat lease buildings leveled off this year, and values of strip centers and malls dropped by between 2 and 7 percent.

Others have noted stock and economic trends that tend to favor more defensive stocks like REITs, such as trade tensions between the United States and China, and stressed that property companies have been lowering their debt, with outstanding loans accounting for a healthy 30 percent of valuation.

Some of the REITs that had the strongest performances last year were geared toward last-mile delivery services and food storage.

The sector has seen a total of $57.7 billion to date this year in mergers and acquisitions, down a bit from last year’s $67.1 billion. [WSJ] – Eddie Small