Nareit's REIT Report Podcast

This episode of the REIT Report’s ongoing series “Building to Zero” features Ben Myers, senior vice president of sustainability at BXP (NYSE: BXP) and continues to dig deeper into the real estate industry’s journey to reduce emissions from the built environment.Myers shares his view on why it is so important to take a long term view on electrification, which refers to the replacement of fossil fuel equipment, like internal combustion engines and gas boilers, with electric motors or heat pumps.The common case for electrification is that building owners can decarbonize and utilize equipment that is significantly more efficient. “Electrification of everything is what I'm here to talk about today. And in particular, how to spread this religion around electrification. I am a believer that we need to electrify the built environment and I'll explain why, but I do think that we need to take some important steps to get there,” Myers says.

Matt Werner, senior portfolio manager for REITs at Chilton Capital Management, was a guest on the latest episode of Nareit’s REIT Report podcast.Werner emphasized the resilience of public REITs amid economic challenges, especially in managing debt maturities and maintaining dividend payments during periods of uncertainty.According to Werner, public REITs are now positioned to capitalize on market volatility, with robust balance sheets enabling them to acquire distressed properties. "We're still kind of waiting for the sort of big moment for public REITs to go out and make significant acquisitions or for private companies to bite the bullet and decide that going public is the only kind of way to save their company."

Bill Hughes, managing director of liquid strategies at DigitalBridge Investment Management, was a guest on the latest edition of the Nareit REIT Report podcast.Hughes discussed some of the trends and developments in digital infrastructure and real estate securities markets today. He noted that the types of real estate businesses that get characterized as digital infrastructure currently compose around 40% of the publicly traded real estate market by value. “That's something that was not true a decade, a decade and a half ago.”When analyzing digital infrastructure, the same issues that impact traditional real estate—such as supply and demand dynamics, unit level economics, the capital intensity of the asset over time, lease structures, and credit counterparties—should all be considered, Hughes said.

Elisabeth Troni, fund manager with CBRE IM’s flagship global investment strategy, was a guest on the latest episode of Nareit’s REIT Report.CBRE IM’s flagship global strategy began to allocate to listed REITs in December 2022. Troni explains the timing behind that decision and the scope it gave the strategy to access niche and specialized property sectors.Since December 2022, the strategy has entirely invested in an actively managed but broadly diversified strategy, Troni said. She added that the addition of a completion strategy, which would unlock opportunities in those specialty sectors, is currently under review.Troni noted that while the market is unsure about when rate cuts may occur, “what we do feel confident about is the fact that higher rates are priced into public markets in terms of the pricing levels, and they have a strong chance to outperform when the market can see the end of rising rates.”

Steve Loffman, managing director at Raymond James, was a guest on the latest episode of Nareit’s REIT Report podcast. Loffman is also a program director and speaker at Nareit’s REITwise: 2024 Law, Accounting & Finance Conference in Hollywood Florida, March 19-21.Loffman described the contours of the REIT capital market landscape today, noting that broadly speaking, “it's been a little bit challenging,” with REITs trading at a discount to net asset value (NAV). “But as time moves on, and if we believe in the yield curve, which I certainly do, I think we'll be making strides to get closer to NAV from an equity perspective,” he added.

This episode of the Nareit REIT Report’s ongoing series, “Building to Zero,” features Dana Schneider, director of energy and sustainability and ESG at Empire State Realty Trust, Inc.(NYSE: ESRT) and continues the discussion related to the real estate industry’s journey to reduce emissions from the built environment.In this episode, Schneider shares how ESRT began the journey on decarbonization more than 15 years ago by focusing on making the business case for deep energy retrofits.“By creating a process and publishing our energy and financial modeling, we showed what every step of the process would look like and demonstrated that we could have a guaranteed savings of 38% with a payback of three years. Frankly, it's better than we thought it would be,” Schneider says. “But more important than just the results was the idea that we could share the process and show what did and didn't work, how to do the right steps in the right order, how to work from the outside of the building in.”

Tony Edwards, Nareit’s senior executive vice president, was a guest on the Nareit REIT Report® podcast. Edwards will be retiring from Nareit at the end of March, and in this episode he reflects on some of the highpoints of his career and the major changes in the industry during the past three decades.Edwards said he expects to see more private real estate shift to the public market over time, pointing to the benefits REITs offer in terms of market discipline, low leverage, and their ability to weather market disruptions such as the great financial crisis and the pandemic.

Three members of Citi’s global real estate research team—Nick Joseph in the U.S., Aaron Guy in the U.K., and Howard Penny in Australia—were guests on the latest episode of the Nareit REIT Report podcast. Amid the market cross currents of slower global economic growth, offset to some extent by anticipated lower interest rates, “we are generally constructive on commercial real estate in 2024,” Joseph said. At the same time, Citi’s 2024 global real estate outlook also stresses the importance of stock picking, rather than broader sector and subsector allocations.For the U.S., Citi is projecting total returns for REITs of 10% to 15% in 2024, with adjusted FFO growth of about 3%. “Growth is being driven by slowing but still solid operating results, development and the redevelopment benefit that is coming on, and the retention of free cash flow,” Joseph said.

Travis McCready, head of life sciences, Americas markets, at JLL, was a guest on the latest episode of Nareit’s REIT Report podcast.McCready said 2023 was one of the most challenging years in memory for life sciences real estate due to a slowdown in the deployment of venture capital, higher interest rates and inflation, and “rather aggressive” real estate development of lab space in the past two years.Based on activity so far in 2024, though, “the year is already shaping up to be much more positive than the year before, so fingers crossed that we are looking at a return to an upwards trajectory in the months and year to come,” McCready said.

Laurel Durkay, head of global listed real assets at Morgan Stanley, was a guest on the latest edition of the Nareit REIT Report podcast.Durkay said REITs today are “cheap” versus broader equities. “They do screen attractively versus private real estate. They look compelling versus where REITs have historically traded, and they look pretty fairly valued versus fixed income. The macro backdrop is favorable with interest rate stabilization and the increasing likelihood of cuts this year… I think valuations look attractive.”Despite this backdrop, negative rhetoric about the real estate sector “and the potential for the other shoe to drop” persists, Durkay said. “Investors in Europe and Asia really do want to learn more about real estate, but it's hard to move past that conversation of the fate of offices in big U.S. cities like New York and San Francisco,” she noted.

Jeff Palma, senior vice president and head of multi-asset solutions at Cohen & Steers, was a guest on the latest episode of Nareit’s REIT report podcast.Palma discussed the launch of Real Assets Compass, an interactive tool designed to help institutional investors and financial advisors make informed decisions about strategic allocations to listed and private real estate.“We feel that there's an education gap among clients, institutional and individual investors alike, about some of the benefits of real estate,” Palma said. “Despite the evidence that we have that historically real estate has positively contributed to both returns and diversification benefits in broad multi-asset portfolios, it's sort of been an under-owned asset class,” he noted.

John Worth, executive vide president, research and investor outreach at Nareit, was a guest on the latest episode of the REIT Report podcast.Worth outlined some of the key messages in Nareit’s 2024 REIT Outlook, including three reasons that may make 2024 a good year for REITs. He noted that historically, at the end of a Federal Reserve tightening cycle, REITs have outperformed private real estate and equities over the following two and four quarters. “We think we saw a little preview of that at the end of the fourth quarter,” Worth said.Meanwhile, the divergence between public and private real estate valuations continues to be quite wide. Worth said that gap is expected to close in 2024, both through REITs performing well and continued markdowns for private real estate.

William Maher, director of strategy and research at RCLCO Fund Advisors (RFA), was a guest on Nareit’s REIT Report podcast.RFA’s clients include some of the larger public pension funds, and increasingly non-U.S. investors.Maher said that most U.S. institutional investors today allocate less than 10% of their real estate allocation to REITs. “I think that indicates a big underweight that they're probably not aware of,” Maher said. He added that RFA’s investor clients continue to want greater exposure to a broader range of property types and will continue to look to REITs to provide that access.Mid-size and larger institutions should have a “permanent long-term position in REITs for diversification, market knowledge, [and] exposure to property types that are difficult to access in the private markets,” he said.

Gwyn McNeal, executive vice president and chief legal officer at  Extra Space Storage Inc. (NYSE: EXR), was a guest on the Nareit REIT Report podcast.McNeal discussed her role at Extra Space, the merger with Life Storage and issues she has dealt with on the legal and personnel side, legal issues facing all REITs today, as well as advice for those seeking a legal career in the commercial real estate sector.Turning to the priorities for 2024 that she is most excited about, McNeal referred to a mandate from Extra Space’s CEO to focus on the fundamentals, after an “incredibly crazy” 2023. That involves making sure new staff are fully onboarded and trained, operating platforms are able to fully support the newly merged company, and that properties acquired through the merger are up to the same specifications as the Extra Space properties.

Andrew Alperstein, PwC U.S. real estate partner, and Daniel Sullivan, PwC U.S. financial markets and real estate leader, discussed key takeaways of PwC and ULI’s Emerging Trends in Real Estate 2024 report, which incorporates data and insights from more than 2,000 industry experts.One of the main themes of this year's report is what it terms the “Great Reset,” in which old assumptions are no longer valid. Alperstein said commercial real estate investors are going to have to be “more diligent, more operationally focused, as they strive to add value and profitability relative to recent years when low rates, decreasing cap rates, and a high amount of leverage was a big part of the way value was created and profitability was obtained.”As for transaction volume, the current environment of higher rates, more rigorous underwriting from the lender side, and a pullback from the banks is going to make it challenging, particularly to get bigger deals done, Alperstein said.

Tracy Powell-Rudy, vice president of corporate engagement at Integrate, a nonprofit that helps organizations identify, recruit, and retain autistic and neurodivergent talent, was a guest on the latest episode of Nareit’s REIT Report podcast.Powell-Rudy discussed the level of awareness around neurodiversity in the wider population today, the level of participation for neurodiverse individuals in the workplace, and some of the key factors impacting their hiring.She also discussed practical steps that companies can take to become more aware of neurodiversity, to make their hiring processes more amenable to neurodiverse candidates, and how to signal to the outside world that neurodiversity is something that’s on a company’s radar.In addition, Powell-Rudy covered best practices for companies that are starting up hiring programs or looking to work with a partner.

Doug Weill, founder and co-managing partner of Hodes Weill & Associates, a leading global capital advisory firm, was a guest on the latest episode of Nareit’s REIT Report podcast.Hodes Weill recently released the 2023 Real Estate Allocations Monitor, which showed that institutions’ target allocations to real estate were flat at about 10.8% year-over-year.“Institutions are very cautious in the market today. And while they're reasonably optimistic about the opportunity to invest over the next couple of years, right now in the moment there are numerous cross currents,” Weill said.At the same time, several large institutions have increased their target allocations over the past 12 months, Weill noted. “I think that has been a signal to the market that they are encouraged about the opportunity to invest and perhaps lean into the opportunity.” Such institutions include Norges Bank and CalSTRS.

Tom Bartlett, president and CEO of American Tower Corp. (NYSE: AMT), was a guest on the latest episode of Nareit’s REIT Report podcast.Bartlett discussed American Tower’s recently launched Sustainability Report and provided an overview of the REIT’s broader sustainability strategy. He explained that “neutral hosting” is central to the company’s inherently sustainable business model. “Neutral hosting allows multiple customers to lease space on a shared single tower or asset, which reduces the number of sites required and minimizes the industry's overall environmental impact”, he said.Beyond providing digital infrastructure, Bartlett noted that American Tower’s global presence enables it to play “a significant role in fostering connectivity in a responsible, equitable, and sustainable way to realize our vision of building a more connected world.”

Aaron Halfacre, president and CEO of Modiv Industrial, Inc. (NYSE: MDV), was a guest on the latest episode of Nareit’s REIT Report podcast.Halfacre discussed Modiv’s evolution toward focusing on industrial manufacturing facilities, after starting out as a diversified net lease REIT.“We discovered that industrial manufacturing facilities were, like us, flying a bit below the radar and also, like us, providing investors with very attractive upside potential. The manufacturing sector has strong fundamentals, solid cap rates, healthy contractual rent bumps, long-term dependable leases, and somewhat of an inefficient transaction marketplace. All of that made it clear to us that we were onto something,” Halfacre said.

David Auerbach, REIT industry expert and the chief investment officer of Hoya Capital & Hoya ETFs, was a guest on the latest episode of Nareit’s REIT Report podcast.Auerbach said fundamentals for REITs have remained “very strong,” despite the Federal Reserve’s tighter monetary policy. “If you look at the last quarter, public REITs reported same store property level income about 10% above where they were pre-pandemic. Many of these REITs have been preparing for winter for a long period of time, cleaning up their balance sheets, focusing less on variable rate debt.”He added that investors want management teams to do four things—grow revenues, grow profits, grow guidance, and grow dividends. “Pretty much by and large, that's been what's happening across the spectrum in the REIT industry.”

Brad Thomas, real estate expert, analyst, and CEO of Wide Moat Research, was a guest of Nareit’s REIT Report podcast.In this latest episode, Thomas discusses many of the themes and topics that appear in his newly released book, REITs for Dummies, including the increasingly important role played by PropTech within the sector.“We've seen PropTech throughout most every property category, in multifamily, self-storage, you name it. Every sector has some PropTech component, which is really an interesting part of this innovation…it's really helped these companies grow and produce more earnings,” Thomas says.

Avis Devine, associate professor of real estate finance and sustainability at the Schulich School of Business at Toronto’s York University, was a guest on the latest episode of Nareit’s REIT Report.Devine discussed new research, sponsored by Nareit, into the sustainability performance of listed REITs and private real estate as well as their approaches toward sustainability commitments and disclosure, and the relationship between sustainability disclosure and performance among REITs.“Public and private real estate firms make different decisions regarding their sustainability commitments and their disclosure,” Devine said. Using the Global Real Estate Sustainability Benchmark (GRESB) reporting structure, the research shows that historically REITs have outperformed private funds on sustainability performance. However, that gap has been narrowing in recent years

Todd Kellenberger, REIT client portfolio manager at Principal Asset Management, was a guest on the latest episode of Nareit’s REIT Report podcast.Kellenberger noted that listed REITs currently trade at significant valuation discounts to both equities and private real estate. He pointed out that the earnings price multiple of REITs versus equities today is over two standard deviations away from the long-term mean—"a level that's even cheaper than what we saw during the GFC, particularly for U.S. listed REITs.”Meanwhile, the change in valuations for private real estate have been slower than for listed REITs, given the appraisal-based methodologies and limited price discovery in today's transaction markets, he added.

Marcos Alvarado, president and CIO at Safehold Inc. (NYSE: SAFE), was a guest on the latest episode of Nareit’s REIT Report.Alvarado said Safehold has made a “tremendous” amount of progress in the last six years in terms of portfolio expansion and growth in enterprise value, “but in the greater scheme of what we're looking to accomplish, I think we're still very, very early on…that's what excites us about the future.”

Travis McCready, head of life sciences, Americas markets, JLL, was a guest on the latest episode of the REIT Report.Speaking in conjunction with the release of JLL’s 2023 Life Sciences Industry and Real Estate Perspective, McCready noted that while Boston and San Francisco remain leading life science markets on a national and international level, other markets in the United States are showing signs of growth and vitality.

As part of Building to Zero, an ongoing series of interviews on the decarbonization of the commercial real estate sector, Duane Desiderio, senior vice president and counsel for the Real Estate Roundtable, joined a special episode of Nareit’s REIT Report podcast.Desiderio spoke with Nareit’s Senior Vice President of Environmental Stewardship and Sustainability Jessica Long to discuss recent and upcoming activity related to federal policy that supports real estate owners’ efforts to measure and reduce carbon emissions, disclose climate-related financial risk and opportunity, and comply with local building standards.

Richard Barkham, global chief economist, head of global research and head of Americas research at CBRE, was a guest on the latest episode of the REIT Report podcast.Barkham discussed the state of global cross-border real estate capital flows, which totaled $30.5 billion in the first half of this year. That marked a 52% decline from the same period a year earlier and down 44% compared to an average of the first half periods between 2018 to 2022.Despite being a “pretty weak year really,” the mood of the global real estate investor is “far from despondent,” Barkham said. The mood is “wary and cautious until we get a much clearer signal on the glide path for interest rates, both in the United States and in the global economy.”Notable trends during the first half included an inflow of funds into the U.S. from Singapore and Japan, reflecting the buyout of STORE Capital Corp. by sovereign wealth fund GIC and a $1 billion Japanese investment into New York City office.

Nicole Funari, Nareit vice president for research, was a guest on the latest episode of the Nareit REIT Report.Funari discussed Nareit’s new project that initially involves tracking quarterly investment holdings for the 28 largest actively managed real estate investment funds that focus on REITs from 2010 to the first quarter of 2023.While performance returns offer a broad market perspective on what investors think about REITs, by narrowing the focus to active managers, or “people whose income and livelihoods depends on how well they can read the market for commercial real estate, we really get to capitalize on their unique insights and their expertise in this area,” Funari said.

Nareit Senior Vice President for Research Ed Pierzak joined the latest episode of the REIT Report podcast to talk about some of the key findings from Nareit’s 2023 mid-year report.Pierzak noted that two main factors are at play today—the divergence in public and private real estate valuations, and challenges in the capital markets, particularly around refinancing.The public-private valuation gap really reached its peak in the latter half of 2022, Pierzak said. Progress has been made since then, albeit slowly, he noted. However, whenever such valuation dislocations occur, “they can present opportunities for REIT investors…historically, when we’ve seen these major public and private valuation divergences, we see that REIT total returns have tended to bounce and even surge.”

Gene Rubin, president of management consultancy firm Rivel, joined the latest episode of Nareit’s REIT Report podcast to talk about strategic investor communications and investor engagement in the REIT space.Rivel recently carried out a generalist investor perception study on the REIT industry and Rubin discussed some of the findings that emerged. He noted that the outlook for REITs as an investment class in North America has “improved significantly” since a similar survey was undertaken in 2018. In the previous survey, over half of respondents said they were underweight in REITs, compared to about 40% this time.

Darin Turner, managing director and chief investment officer for Invesco’s listed real assets team, was a guest on the latest edition of the Nareit REIT Report podcast.Turner discussed the scope and growth of the tower REIT industry, its performance history, how the leasing structure works, the impact of 5G, global opportunities and challenges, benefits for the sector from AI and edge computing, and more.Key Takeaways from the interview include:There are approximately 420,000 macro tower and small cell sites across the United States, with REITs owing about 90% of the approximately 150,000 macro tower sites.There hasn’t been any significant new development of macro tower sites in the last decade. New supply is “incredibly limited.”Most of the recent growth for tower REITs has been in international markets, in both emerging and developed markets.

Tim Bodner, global and U.S. real estate deals leader at PwC, was a guest on the latest episode of the REIT Report podcast.Bodner commented on the current state of real estate transaction activity, how different property segments are faring, opportunities amid today’s challenging environment, strategies being used to get deals done, and more.During the interview, Bodner noted that:It’s a “much more challenging” deal environment today than it was previously.Pockets of strength are emerging across the real estate landscape, including logistics, self-storage, areas of the hospitality sector, experiential real estate, and even office.The most important factor in terms of getting deals done today is the stability of the underlying trends that are driving activity in a particular sector.

Julie Whelan, global head of occupier research at CBRE, was a guest on the latest episode of the Nareit REIT Report podcast.During the interview, Whelan discussed broad office occupancy trends, changes in how office space is utilized, the flight to quality, the role of flexible office space, the importance of an office’s location, and more.Among Whelan’s key takeaways were:Net effective rents, that account for landlord concessions, are continuing to grow at the top tier of the office market.In some cases, the rent differential between top quality and lower quality office space has never been greater.A great office building alone isn’t enough. “Buildings have to be in great submarkets right now,” and that means mixed-use environments.“The office has a really exciting role to play in the future of how cities are reinvented.” Office space is going to be in a transformative phase as it plays a key role in the evolution of mixed-use locations.

Nina Galbiati, Norges Bank’s global lead sustainability for real estate, was a guest on a special episode of Nareit’s REIT Report podcast.Norges Bank is a long-term investor that has roughly 4.1% of their global investment portfolio invested in real estate, with about half of that allocated to public REITs. With the firm’s focus on maximizing risk-adjusted returns, Norges has been an influential leader in promoting the adoption of sustainability for real estate companies globally for many years.On this episode of the REIT Report, Galbiati joined Nareit’s Senior Vice President of Environmental Stewardship and Sustainability Jessica Long to discuss how the real estate industry is addressing a key challenge of decarbonization planning and the importance of real estate companies in the U.S. clearly disclosing their strategy, decision making, and targets around key environmental matters.“Real estate is facing tremendous pressure to decarbonize. This is partly regulatory pressure, but it’s definitely coming from a shift in demand from tenants as well as investors. We don’t think the current market valuation is pricing those risks adequately today,” Galbiati said.

David Stafford, deputy chief investment officer at The City of Austin Employees' Retirement System (COAERS), was a guest on the latest episode of Nareit’s REIT Report Podcast.During the interview, Stafford discussed COAERS’ decision to use REITs as part of a portfolio completion strategy starting in early 2020—an approach that has been successful for the fund and one that it continues to assess on an ongoing basis. He also spoke about the importance of having a mindset attuned to trying a new investment approach, the benefits that REITs provide to COAERS, market issues that COAERS is watching, advice for funds considering a change in strategy, and more.COAERS is a defined benefit plan that administers retirement benefits for regular employees of the city of Austin and currently serves about 19,000 current, inactive, and retired members. The system’s investments total approximately $3 billion and are broadly diversified across asset classes including equities, real assets, fixed income, multi-asset strategies, commodities, and cash.

John Vojticek, global head of liquid real assets at DWS, a global asset manager with nearly $1 trillion of assets under management, was a guest on the latest episode of the REIT Report podcast.Vojticek commented on the operating environment for listed REITs, DWS’s recommendations for using REITs in conjunction with private real estate to complete portfolios, the access REITs provide to emerging asset classes, the benefits of global investment in REITs, and more.

Uma Moriarity, senior investment strategist at CenterSquare Investment Management, was a guest on the latest episode of Nareit’s REIT Report podcast.Moriarity spoke about how REITs are faring in the current interest rate climate, how their valuations compare to private real estate, REITs and their position in the capital markets, property sectors that CenterSquare is bullish on, and more.A pause in interest rate hikes is generally expected to occur at the next Federal Reserve meeting, Moriarity said. While some are expecting a subsequent rate hike in July, “it’s fair to say that we're closer to the end (of the rate hike cycle) than we are to the beginning,” she added.

Andrew Duffy, co-founder, managing partner, chief investment officer, and senior portfolio manager of Ranger Global Real Estate Advisors, an independent investment advisor, was a guest on the latest episode of Nareit’s REIT Report podcast.Duffy spoke about: the state of commercial real estate today and how Ranger Global distinguishes between the performance of geographies and property types; the appeal of next generation property types; the advantages and risks of investing domestically versus globally; the dislocation between listed and private real estate; and the benefits of investing in listed real estate funds.

Chris Benjamin, CEO of Alexander & Baldwin, Inc. (NYSE: ALEX), was a guest on the latest episode of Nareit’s REIT Report podcast.Benjamin, who will step down as CEO on June 30, reflected on his tenure at A&B, why supporting community organizations has played an important complement to his executive role, the transformation the company has undergone and its decision to convert to a REIT, changing the culture of A&B and its progress on DEI issues, and more.Benjamin said that now is a good time for a transition in leadership, given that “we have nearly completed the significant transformation that we’ve gone through as a company.” The leadership change also coincides with Benjamin’s 60 th birthday, a point at which he is eager to pursue new interests. Lance Parker, currently A&B's president & COO, has been appointed president & CEO effective July 1.

John Haskell, founder and chief investment officer at Atla Capital Management LLC, was a guest on the latest episode of the Nareit REIT Report.During the interview, Haskell talked about the opportunities from investing in global emerging market listed real estate, the scope of the market, the key theme of urbanization, challenges posed by the lack of reporting standardization, the potential shelter that emerging markets offer relative to other markets, and more.Haskell manages the Atla Global Urbanization Listed Fund. A key theme for the fund is urbanization, and the opportunities presented by the rapid rise of emerging market cities.“The greatest social and economic transformations in the world today are in developing countries and it all comes down, in my opinion, to urbanization. While developed cities have mostly plateaued in population growth, emerging market cities are inflecting in population and in wealth,” Haskell said.

Jonathan Miniman, global portfolio manager and head of the Americas real estate securities research team at CBRE Investment Management, was a guest on the latest episode of the Nareit REIT Report.During the interview, Miniman discussed: concerns impacting commercial real estate—including the banking crisis; potential opportunities for REITs in the months ahead; the role REITs can play in conjunction with private real estate; and the role that active managers can play for REIT investors.Miniman said that the repricing of REITs that occurred last year, coupled with a likely near-term pausing in interest rate hikes, provide a “catalyst” for the asset class going forward.“The listed market has taken a whole lot of the pain already,” Miniman said. He noted that in the past four historical interest rate increase cycles, listed REITs have started to gain ground about three months prior to the final increase.

REITs are likely to attract growing interest from private real estate funds looking to deploy capital where they see value discrepancies, says Christian Busken, senior vice president and director of real assets at FEG Investment Advisors.“There's a growing recognition that REITs present some attractive opportunities and I think that we'll see more private firms getting into the space,” Busken told the REIT Report podcast. He noted that “it's not unusual for us to see some of our private real estate funds selectively take positions in REITs where they see some kind of a value discrepancy.”Busken added that with $300 billion-plus of private real estate dry powder on the sidelines and needing to be deployed, “we could definitely see more private funds playing in the market.”

Recent survey data from Columbia Threadneedle Investments shows that 93% of financial advisors plan to maintain or increase their real estate allocations over the next 12 to 24 months, confirming that the “timing is right” for the launch of the Columbia Research Enhanced Real Estate ETF (NYSE Arca: CRED), says Marc Zeitoun, head of strategic beta at the global asset manager.Columbia Threadneedle launched CRED on April 26. The ETF tracks a custom, proprietary index which typically tracks 70-90 REITs weighted across eight sectors. It is designed to outperform the FTSE Nareit All Equity REITs Index through research-driven security selection and modified market cap weighting that emphasizes income and geographic opportunity.Speaking on the REIT Report, Zeitoun noted that the firm’s survey data also showed that 82% of financial advisors favored the REIT structure as a way to express their preferences in real estate. “So, we think that timing is right, and we know for sure that the packaging is right relative to the way that advisors and allocators build their client portfolios.”

REITs are making gains across the board in adopting practices that enable investors to make informed decisions taking into account environmental and social strategy and performance, says Jessica Long, Nareit senior vice president for environmental stewardship and sustainability.Speaking on the REIT Report, Long noted that Nareit’s latest REIT ESG Dashboard shows that 100% of the top 100 REITs are reporting publicly on ESG in some manner. “REITs really are demonstrating that as an industry, real estate is taking seriously the requests from investors and regulators and other key stakeholders that are saying that ‘these environmental and social issues are important to us and we want to understand how you're managing those things.’”One data point in the latest dashboard shows that 89% of REITs are reporting on their climate risk policy. Long noted that these percentages show that REITs “are out ahead on this….and putting in place policies and procedures and looking at the metrics to help better manage this risk and understand what's happening within a REIT’s real estate portfolios.”

Championing change related to diversity, equity, and inclusion matters requires organizations to actively commit people and resources to the task, to clarify that change is everybody’s responsibility, and to build coalitions wherever possible, says Adjoa B. Asamoah, an advocate of racial equity and an award-winning social impact strategist.Asamoah, a keynote speaker at Nareit's REITwise: 2023 Law, Accounting & Finance Conference, developed the legislative strategy for the CROWN Act and leads the movement on behalf of the CROWN Coalition to end race-based hair discrimination.Speaking on the Nareit REIT Report, she described the CROWN Act as a “blueprint for championing change,” and added that it has been “groundbreaking on so many fronts and really shows that people can have a role in creating the society that they want to live in.”

A record number of products still under development in the life sciences sector continue to provide tailwinds for the industry, despite volatility in the broader macroeconomic environment, says Matt Gardner, CBRE’s U.S. life sciences leader.Speaking on the Nareit REIT Report, Gardner noted that a bull run of investment in life sciences, that started in 2015, “left us with an incredible number of products in development. And those are still there.”Gardner stressed that the life sciences industry doesn’t follow broader economic patterns. “If a product takes 10 to 15 years to develop, the investment in that product isn't going to follow a seven year economic cycle, which is why we look at this record number of products in phase two and phase three clinical trials as such an important sign of the industry's overall wellbeing. The science is still there,” he said.

Residential REITs offer investors a safe option amid current volatility, with strong balance sheets, leasing tailwinds, and the continued shortage of affordable starter homes among the key factors supporting growth in the sector, says David Auerbach, managing director at Armada ETF Advisors.Armada’s flagship product HAUS is an exchange traded fund (ETF) comprised of 25 pure play residential REITs in the multifamily, manufactured housing, single-family rental, and senior housing segments. It recently celebrated its one year anniversary of being a publicly traded entity.Speaking to the Nareit REIT Report, Auerbach noted that most REITs in the residential sector were able to lock in attractive long-term debt and are well-capitalized to handle the current interest rate environment.As for leasing and rent growth trends, Auerbach pointed to continued strength in many of the Sunbelt markets, while there are signs of residents returning to some of the coastal markets as well.

Farmland Partners Inc . (NYSE: FPI) President and CEO Luca Fabbri says there is “huge potential” to grow the share of farmland assets within institutional investor portfolios, especially given the sector’s risk return profile, asset appreciation, and inflation protection benefits.A co-founder of Farmland Partners alongside former CEO Paul Pittman, Fabbri was named president in October 2021 after serving as the company’s CFO since its inception. He became CEO in February.Speaking with the Nareit REIT Report, Fabbri said the value of U.S. farmland assets is about $2.7 trillion, with institutional investors accounting for probably 5% or less of that amount. That means that there is still a lot of education to be done to show investors that the asset class offers many potential benefits. Among those are the scarcity of the underlying asset, an attractive risk return profile, asset appreciation, inflation protection, and the absence of correlation with other asset classes.

Essex Property Trust, Inc . (NYSE:ESS) President and CEO Mike Schall says the multifamily REIT is facing favorable tailwinds—including continued tech investment in its core markets, muted supply, and strong balance sheet fundamentals—as he prepares to step down from his current role at the end of the month.Schall has served as president and CEO since 2011. His successor is Angela Kleiman, Essex’s current SVP and COO.Speaking with the REIT Report, Schall said, “Coming out of periods of disruption, we've always been an opportunistic company. We've always found the right investments in the right place. And I think this is the case today.”Schall highlighted the rapid pace of investments underway today by tech companies in artificial intelligence, which is likely to drive the economies of northern California and Seattle. “That will help Essex continue to grow as it has over much of the last 30 years or so.”

The supply of housing in the United States has “never been more out of balance”—with the lack of affordable housing particularly acute—making long-term policy initiatives on the federal, state, and local level more important than ever, says Sharon Wilson Géno, president of the National Multifamily Housing Council (NMHC).Wilson Géno assumed the role of president from Doug Bibby in January, when he officially stepped down after more than 20 years of leading the organization.Speaking on the REIT Report, Wilson Géno said, “The bottom line is, the demand for more housing in this country is as far as the eye can see.”Research by NMHC and other organizations indicates that the U.S. housing stock is in a deficit of about 4 million units.Wilson Géno said new households have formed in the wake of the pandemic, “and that really put a significant strain on the housing supply that was available.” Sizeable rent increases also occurred into the first half of 2022, she noted.

Dynex Capital, Inc . (NYSE: DX) CEO Byron Boston describes the current geopolitical and macroeconomic conditions as an “evolving period” in which the mREIT is maintaining a flexible mindset and evaluating multiple scenarios for the future.Boston, who is also the mREIT’s co-chief investment officer, told the REIT Report that “we're respectful of this evolving period. We're respectful that we may continue to be surprised.” In response, Dynex Capital is carrying more cash and liquidity on its balance sheet, he noted. “Liquidity is absolutely key.”This year, Dynex Capital will not be trying to predict exactly how far or how fast inflation will go, Boston said. “We are evaluating from a month-to-month basis. We're carrying more cash and liquidity because we feel it is dangerous to try to pick one scenario and structure your portfolio around that one scenario with economic variables being this uncertain, and the potential for exogenous shocks to the economy so high.”Dynex Capital’s number one strategy, according to Boston, is “how much risk should we take in this environment? We have a flexible enough mindset not to reject the data as it's coming out.”

Investors looking to allocate to real estate today should consider the listed market first, with REITs in particular priced to deliver annual returns in the high single digit range for the next several years, says Lisa Kaufman, head of global securities at LaSalle.“We see public real estate as unequivocally more attractive than private real estate today,” Kaufman told Nareit’s REIT Report podcast.Kaufman said the REIT market has been “really very rational” through the recent period of tightening financial conditions, “and financial conditions do remain in the driver's seat.” She noted that REIT returns “are attractive and we have a higher level of conviction in our outlook today just given the material tightening of financial conditions and the repricing that's already occurred in the REIT sector.”REITs are underrepresented today in institutional real estate portfolios, Kaufman said. Listed real estate represents around 45% of institutional quality real estate worldwide, but only about 20% of investors’ real estate allocation. REITs have the additional benefit of being disproportionately weighted toward non-traditional property types like self-storage, health care, and data centers, she said.

REITs provide protection against high and moderate inflation across a range of property types, says Nareit Vice President of Research Nicole Funari.Speaking on Nareit’s REIT Report podcast, Funari noted that, in terms of how REITs respond to inflation pressures, “people are inclined to believe that there might be differences among the property sectors, but the data doesn't bear that out.”

The potential for rolling country-level recessions and the impact of higher interest rates on transactions and capital flows are among the main themes influencing global real estate investment in 2023. The result, according to Citi’s global real estate research team, are opportunities mixed in with the broader uncertainty facing investors.“I think there's a lot more uncertainty entering 2023 than we've seen at least in the past few years, putting aside COVID. I think that's going to be the biggest challenge and opportunity depending on how that turns out,” Nick Joseph, Citi’s global head of real estate and head of the U.S. real estate and lodging research team, told Nareit’s REIT Report podcast.Global sector-specific trends that Citi is monitoring include: the future of the office; e-commerce and the impact on brick and mortar; lodging demand and recovery; health care coming out of the pandemic; housing trends; and digital transformation and its impact on infrastructure.

The REIT industry is undertaking “critical” work to ensure that real estate’s leadership, staff, and procurement opportunities better reflect the nation’s wider demographics, says Ayris T. Scales, Nareit’s senior vice president for social responsibility and global initiatives.Speaking on Nareit’s REIT Report, Scales said that Nareit is working together with its REIT members to accelerate change collectively and “elevate the way that we do things on behalf of the industry.”Scales outlined two key projects underway at Nareit to advance diversity and inclusion throughout the industry.She noted that the grant application process for the Nareit Foundation’s Dividends through Diversity, Equity, and Inclusion (DDEI) Giving Campaign opened this week.Among the groups urged to apply, Scales said, are organizations focusing on ways to help secure talent for the real estate industry by looking at ways to expose high school or college students to real estate opportunities through mentorship, internships, and any other types of leadership and professional development opportunities.

REITs have historically made solid returns following the onset of a recession, particularly in the early stages of the cycle, making this an ideal time for investors to begin building an exposure to the asset class, says Rich Hill, head of real estate strategy and research at Cohen & Steers.Speaking on the Nareit REIT Report, Hill said REITs have historically produced average 12-month forward returns of more than 10% following the onset of a recession, with early-cycle returns exceeding 20%.

A recovery in the real estate capital markets is likely to begin around the middle of the year, with transaction activity becoming better supported over the course of 2023 as financial stresses start to ease, says Richard Barkham, CBRE’s global chief economist.Speaking on the Nareit REIT Report podcast, Barkham said, “real estate capital markets tend to lead the economy, both on the downside and in the upturn…it’s going to take a while for investors to start to move because they want to assess the situation in terms of fundamentals. But we do see a capital markets recovery beginning around mid-year.”Barkham said transaction activity is likely to become better supported over the course of the year as financial conditions improve, primarily in the second half of the year. However, “that's not to say there won't be activity in the first half of the year. There is a record amount of capital looking to deploy in real estate and looking for opportunities, particularly if pricing is a little bit more favorable.”

Centers for Leadership Excellence (CLE), a new initiative from the Ferguson Charitable Foundation, seeks to introduce ethnically diverse college students to career opportunities available in real estate, with the long-term goal of helping to change the racial and ethnic composition of the sector.“We want to get these students into the boardroom and into the c-suite because as leaders they can effectuate change,” Bill Ferguson, chairman of Ferguson Partners and president of the Ferguson Charitable Foundation, told the Nareit REIT Report.Ebony Mitchell, director of strategic initiatives at Ferguson and student liaison for CLE, noted that with the lack of ethnic diversity in commercial real estate, “there's been a limited number of role models and mentors of color to attract young collegiate talent on and off campus.” She added that many of Ferguson’s clients have also struggled with attracting diverse talent, especially at the entry level due to traditional campus recruiting efforts.Ferguson explained that students selected into the CLE Program are required to take a certain number of courses in real estate in order to graduate with a minor in real estate. Given Ferguson’s vast network of corporate relationships across 12 sectors in the real estate industry, “we are connecting them with clear opportunities,” he said.

REITs have demonstrated resilient operational performance and are well prepared for the continued economic uncertainty, higher interest rates, and elevated inflation expected in the coming year, says Ed Pierzak, Nareit’s senior vice president for research.Speaking on the Nareit REIT Report, Pierzak noted that REITs are not only performing well but are keeping pace with inflation. Meanwhile, balance sheets are in “great shape,” with leverage ratios near historical lows.With the risk of recession a dominant theme for 2023, Pierzak pointed out that “a recession does not have to equate to negative property total returns.”A Nareit analysis of the last six U.S recessions shows that on average, REIT's underperformed private real estate in the four quarters before a recession. However, REIT's outperformed private real estate both during a recession and in the four quarters after. A comparison of the FTSE Nareit All Equity Index to the Russell 1000 Index found that it outperformed broader equities before, during, and after recessions.

As decarbonizing buildings becomes essential to achieving net zero emissions goals, the real estate industry needs to rebalance its efforts away from new building in favor of retrofitting existing buildings, says Jeremy Kelly, director of global research at JLL.Speaking on the REIT Report, Kelly said retrofitting has to become “the new normal” given that about a 10th of global emissions are coming from new construction.JLL has calculated that in mature cities, 80% of office buildings that exist today will still be standing in 2050. That means a retrofitting rate of about 3-3.5% of inventory every single year to meet net zero targets. However, that compares with retrofitting rates that are around 1% today. “So, we've got to triple, quadruple the rates of retrofitting,” Kelly said.

Constriction in the credit markets has caused real estate investment transactions to slow, but there’s still plenty of dry powder on the sidelines ready to execute as soon as clearer price discovery emerges, says Byron Carlock, real estate practice leader at PwC.Speaking on the REIT Report, Carlock said that the current sentiment is one of cautious optimism. “Demand on the street from any of the product types is still quite good, especially multifamily, industrial, even the hotel sector. And frankly, retail is picking up again.”Carlock discussed the sectors highlighted in PwC’s Emerging Trends in Real Estate 2023 report that are likely to be most insulated from economic uncertainty. Industrial was in first place, followed by multifamily. “Affordability of home ownership continues to suffer, so we’re moving to a greater renter orientation in our population,” he said.

The REIT industry is likely to see additional gains in GRESB performance in the years ahead, given that a number of listed REITs appeared in the benchmark for the first time this past year, says Dan Winters, senior director at GRESB.Speaking on the REIT Report, Winters noted that in general, GRESB scores start to ramp up in year two and year three, “so I'm really expecting some additional increases in the REIT score in the years ahead.”Winters also discussed how a flight to quality real estate assets is likely to characterize the next several years, with companies needing to offer a superior investment and occupant experience to maintain competitiveness.Winters said that achieving those aims requires “a solid ESG program that's continuing to advance.” He added that the biggest threat to ESG is inertia, but that in the current economic climate the real estate industry is more likely to accelerate ESG-oriented efforts than pull back.

A growing need for more mid-market affordable housing, particularly in its targeted Sun Belt markets, has Elme Communities (NYSE: ELME), formerly WashREIT, anticipating its strongest growth in 20 years, says President and CEO Paul McDermott.“That mid-market renter is really the deepest part of the demand curve, and we only see that curve growing,” McDermott told the REIT Report. While acknowledging the current volatile interest rate climate, he added that it doesn’t “erase the fact that there is a significant need for more affordable homes, especially in the markets that we're targeting, and in that particular rental band cohort that we're targeting also.”Elme has been fully focused on multifamily since completing the sale of retail and office assets in 2021, although the REIT started messaging its intent to focus on multifamily back in 2016.McDermott noted that households making between $35,000 and $75,000 comprise over a third of rental households in its targeted Sun Belt markets. However, the share of new product delivering into those markets since 2018 that's affordable to households making around $60,000 is 2% or less, he added.

REITs active in life sciences real estate are increasingly looking to complement their domestic portfolios with holdings in international markets where world-class scientists and strong infrastructure are creating a “vibrant ecosystem,” says Travis McCready, head of life sciences, Americas markets, at JLL.“The life sciences market is increasingly going global, and from a REIT perspective, it's going global faster,” McCready told Nareit’s REIT Report. “I can't think of any of the leading REITs, publicly traded or private, that are simply looking at portfolios in the U.S. anymore. Everyone is looking for exposure across the Atlantic and across the Pacific.”In addition to seeking ways to deploy capital, REITs are taking advantage of international markets that are “incredibly effective” at creating conditions ripe for life sciences innovation, McCready said.Elsewhere in the podcast, McCready noted that from a venture capital standpoint, things are looking “quite good” for the life sciences market. However, “where the picture seems to change radically is when you start looking at the public markets, particularly IPOs, which for the life sciences ecosystem is somewhat of the lifeblood and the way that capital and exits are created.”

Healthy building environments have become an essential requirement for attracting and retaining tenants, and also for ensuring that real estate assets avoid becoming stranded for failing to meet baseline requirements, says Joanna Frank, president and CEO of the Center for Active Design (CfAD), operator of the Fitwel healthy building certification system.Speaking on the REIT Report, Frank noted that “health is seen as essential. It is seen as table stakes. If you want to attract and retain tenants, you really need to be able to answer that question of ‘how is this a health-promoting environment?’”For investors, Frank pointed to “a distinct possibility of having stranded assets, of actually seeing your asset become less valuable, if you aren't meeting that baseline for being a healthy building because your peers and your competitors are able to articulate that.”

Widespread acceptance that PropTech is an integral part of the real estate landscape today has helped accelerate the adoption of new tech solutions and paved the way for real estate stakeholders to act more nimbly than before, says Sarah Liu, partner on the Real Estate Technology Investment team at venture capital firm Fifth Wall.“Instead of having to wait sometimes maybe more than a year in order to get a decision, we are seeing folks able to test and pilot technology with a speed to deployment of sometimes just a matter of weeks,” Liu told the REIT Report.Liu noted that four or five years ago, the annual amount invested into PropTech was around $4 billion; by last year that number had risen to about $30 billion.Turning to areas where Fifth Wall is collaborating with REITs in PropTech adoption, Liu pointed to investments in electric vehicle charging and property management, including maintenance and renovation. She noted that there are more opportunities for collaboration that haven't yet been tapped, or are still at the early stages, such as sensor tech and improved building management systems.

Inflation pressures, higher interest rates, and supply chain challenges have created a climate of uncertainty in which commercial real estate executives see revenues coming under pressure, according to Deloitte US Real Estate Leader Jeff Smith.Speaking on the REIT Report, Smith said that Deloitte’s 2023 Commercial Real Estate Outlook, which is based on survey results for more than 450 CFOs, showed that 48% of respondents expect revenues to decrease in 2022. That compares with only about 9% expecting a decrease in the prior year’s survey.Despite the anticipated decline in revenues, CFOs were “pretty positive” when it came to real estate fundamentals, Smith said. Over 50% of CFOs said they expect increased leasing and rental rates in the next 12-18 months, along with decreased vacancies, he added.

Making substantive progress on ESG issues involves going beyond individual corporate actions to encompass industry-wide efforts to bring about real change, says Mneesha Nahata, SVP, Legal & Chief Sustainability Officer at American Tower Corp. (NYSE: AMT).Speaking on the REIT Report, Nahata noted that in addition to finding practical solutions, making investments, and innovating as a company, “it is really about working together and collaboration with other like-minded companies to make a substantive difference, whether that is working together to reduce greenhouse gas emissions, or bridging the digital divide to provide upskilling opportunities to underserved communities.”Nahata said American Tower has placed sustainable operations at the core of its business. “We believe we can be champions of change in the industry and that requires addressing ESG holistically across our organization. And that includes at the very top.”

The recently enacted Inflation Reduction Act contains $369 billion in energy-related provisions, including new tax credit incentives that were previously unavailable to the REIT industry, says Nareit EVP and General Counsel Cathy Barré.Speaking to the REIT Report, Barré points out that a number of obstacles have historically limited the ability of REITs to utilize tax credit incentives, with REIT tax credits typically going unused.Barré points out that under the new legislation, however, REITs that make an eligible investment in EV charging stations, or geothermal and solar capability, will now have the full tax credit available to sell at the REIT level.During the interview, Barré discusses how the legislation will impact REITs that invest in eligible sustainability-related projects. She also explains the nature of the tax credit incentives, and how REITs can qualify.

A corporate governance structure that includes board members that are independent, yet work as strong partners to the executive board, has clear long-term benefits for REIT performance, says Bill Ferguson, chairman of global professional services firm Ferguson Partners.Speaking on the REIT Report, Ferguson said “it’s a fine balance…the board is there to be a fiduciary and represent the shareholders’ interests, but the bottom line is that they also need to be a good partner to the leadership team to make sure that the strategy and the execution of the business makes sense.”Issues surrounding governance, in addition to a range of other ESG topics, will be explored at Nareit’s upcoming REITworks: 2022 Conference held on Sept. 12-13 in La Quinta, California.

With listed REITs trading at sizeable discounts to their underlying gross asset value, institutional investors should prioritize public real estate at this time, says Dave Bragg, co-head of strategic research at Green Street.“Now is a great time to prioritize the public market as it is on sale,” Bragg told the REIT Report.Bragg stressed the advisability for investors to have a dual mandate across the public and private real estate markets as it “really does maximize one's opportunity to generate alpha.”Listed REITs have had meaningful declines this year, Bragg noted, but it reflects a broader trend, which is that “just about every asset that one can imagine has delivered a negative total return.”Bragg also noted that capital flows are a key driver of the disconnect in public and private market values. Private market flows have remained robust in 2022 and may even match last year’s record-setting tally, he said. Meanwhile, flows into listed REITs “remain quite tepid.”

The sale of roughly half of PREIT’s (NYSE: PEI) portfolio of shopping malls, combined with the replacement of unproductive department stores with better performing assets, positions the company well for the future and makes a compelling case for investors, says Chairman and CEO Joe Coradino.Speaking on the Nareit REIT Report, Coradino also commented on how PREIT is evolving its properties into community hubs.“With assets in Philadelphia and Washington, D.C. that are well located, and with opportunities to do upwards of 4,000 apartments, [as well as] medical facilities and life sciences technology, our ability to attract either buyers or joint venture partners is pretty profound. It gives us a way to harvest capital and create value in these properties,” Coradino said.

Real estate deal activity is concentrating on sectors that can perform well in a rising rate environment or in periods of high inflation, with experiential-oriented assets in particular demand, says Tim Bodner, partner and U.S. real estate deals leader at PwC.Speaking on the REIT Report, Bodner said PwC has continued to see activity building in the lodging space, as well as for casinos, marinas, and ski resorts. “All things that are tied to people being out.”Bodner said PwC is anticipating robust deal activity in the back half of 2022, although it may be more episodic in the listed segment of the market.The current environment has meant that there’s a lot more focus on underwriting, Bodner said. “Certainly, growth in rents and in NOI is something that folks are spending a lot of time putting attention on to make sure they feel good about their forward projections.”

Commercial real estate is in a position to take a leading role to advance the sustainability agenda, while regulation is also helping to move the whole industry forward, says Matt Ellis, founder and CEO of Measurabl, a provider of ESG data management solutions.Speaking on the REIT Report, Ellis said there is a “tremendous leadership opportunity in our sector to really take advantage of the transition to green for the better of everyone—our occupiers and customers, our investors, and certainly ourselves as well. I think that we're in a good position to do it. We just can't slow down. We’ve got to speed up.”Ellis described Measurabl, launched in 2013, as a “decade-long project to build the tools for measuring, managing, reporting, and ultimately acting on sustainability for the real estate sector.” He noted that there has been “a profound migration of organizations of every size around the world towards more sustainable business models. This is being done in just the span of a few years.”

The affordable housing crisis facing the United States today is not just a lower-income phenomena, but impacts individuals making six-figure salaries, says Kenneth Bacon, co-founder and managing partner of financial advisory and asset management firm RailField Partners, and former Fannie Mae executive.Speaking on the REIT Report, Bacon, who also serves as board chair at Welltower Inc. (NYSE: WELL), said “if you pull back the covers and look at the data, you'll see that young professionals, people earning six figure salaries in cities like San Francisco and New York, are hard pressed to find places that they can afford.”Bacon said the biggest problem behind the lack of affordable housing today is that the building process has become too long and difficult.As for the state of the commercial real estate sector today, Bacon said that as interest rates rise he sees a return to a “more normalized investment ecology.” That in turn will mean that investors are “going to have to work a lot harder to get some of these returns. I think some deals just aren’t going to get done.”

Conditions in the lodging and hospitality real estate sector are healthy overall, but the combination of ongoing labor shortages, interest rate creep, and high construction costs are acting to soften margins, says Daniel Weede, partner in Morris, Manning & Martin’s hospitality, real estate, and real estate development & finance practices.Speaking on the REIT Report, Weede noted that “there's a lot of optimism in this industry, and I think, at least for the next several years, that's likely to stay.” However, “margins are thinner,” he added.Weede also discussed the potential for consolidation, noting that there will be likely be more merger and acquisition activity in the next 12 to 24 months than seen in the previous 12 to 24 months. “It's a healthy industry, but you've got some players that are doing really, really well, and others that are struggling a little bit.”

Phillips Edison & Co., Inc. is seeing a “really strong” operating environment across its portfolio, but the REIT also has a realistic view that there are going to be pressures weighing on the consumer from a range of macroeconomic factors, Chairman and CEO Jeffrey Edison said.Speaking on Nareit’s REIT Report, Edison noted that questions from investors at Nareit’s REITweek: 2022 Investor Conference last week revolved around the theme of potential disruption to the current environment from factors including higher interest rates and inflation pressure.“I think we have a realistic view that there are going to be pressures on the consumer from those macro events,” Edison said.

Commercial real estate continues to provide a solid hedge against inflation, a trend that has been borne out over multiple decades during periods when inflation has exceeded 4%, says Carly Tripp, global chief investment officer and head of investments for Nuveen Real Estate.Speaking on the REIT Report, Tripp noted that Nuveen research shows that compared to other asset classes, commercial real estate was the only one that emerged with an overall net positive return during those inflationary periods.“We always say real estate is an inflation hedge, and we're seeing that play through right now. So it's a good time to be in commercial real estate in my opinion,” Tripp said.

Consumers remain largely confident about their personal situations, despite a host of broader economic and geopolitical concerns, says Tom O’Hern, CEO of Macerich (NYSE: MAC). That sentiment is fueling sales and leasing volumes across the REIT’s portfolio of retail and mixed-use real estate.“The resiliency of the American consumer is amazing, and it is once again on display. Shoppers have come roaring back to our centers to shop with a purpose,” O’Hern told the REIT Report.During the first quarter, sales were 111% of what they were pre-COVID.“Despite the economic uncertainty regarding inflation that we haven't frankly seen in decades, higher mortgage rates, a very volatile stock market, and the war in Ukraine, American consumers remain largely confident about their own situations,” O’Hern said.

Private equity funds, endowments, and large institutional investors will continue to have a large appetite for commercial real estate given the current inflationary environment and geopolitical uncertainty, says John Sullivan, chair of DLA Piper’s U.S. real estate practice and co-chair of its global real estate practice.Speaking on the Nareit REIT Report, Sullivan said that asset classes with the ability to reprice themselves due to short lease cycles, such as multifamily and industrial real estate, “are viewed as a good bet because you can raise your rents to… at least keep up with inflation.”Sullivan highlighted some of the findings of DLA Piper’s 2022 State of the Market survey, including that respondents see logistics, multi-family, life science, and data centers as offering the most attractive risk- adjusted returns for the next 12 months.

Global investment in U.S. real estate is at its strongest-ever level, with non-core markets and multifamily and industrial asset classes continuing to lead the charge in terms of investor interest, according to Gunnar Branson, CEO of AFIRE, the association for international real estate investors focused on commercial property in the U.S.Speaking on the Nareit REIT Report, Branson noted that while there are certainly lots of concerns surrounding global events, “real estate investing is on a terrific pace in the first quarter.”The top property asset class for institutional investors from around the world continues to be multifamily, Branson said, followed by industrial real estate. And while the office asset class will definitely continue to exist, questions remain about which offices are going to succeed, and which will have to rethink the level of capital investment that will be required to compete, he added.

A skills gap within the real estate industry means that to attract talent, firms must adopt human capital strategies that align with changes in employee expectations, says Gemma Burgess, president of Ferguson Partners.Burgess will become CEO of Ferguson, a global professional services firm, on June 1. Speaking on the REIT Report, Burgess attributed a skills gap within the real estate industry to the fact that many mid-level professionals left the field in the wake of the global financial crisis. “We’re definitely facing a missing generation in our industry. That’s suddenly making the succession work more challenging,” she added.Meanwhile, Burgess pointed to changes that have occurred in the workplace. “People want to work in different ways today. They want to work more flexibly. They certainly want to work within an environment where they feel like they belong and that there’s a culture that they believe in, and they can see a future for themselves.”

Although a return to the office has started in earnest, it will take the rest of 2022 to take hold, and even longer before clear patterns of usage emerge, says Julie Whelan, global head of occupier research at CBRE.Speaking on the REIT Report, Whelan said it will likely be 2023 “before we can really start to hang our hat on trends that we can say are stable [in order] to build assumptions about what new work patterns are going to look like.”Whelan described current office usage as “muted…but the good news is that it’s picking up.” Some of the Southern states have seen a higher return to office rate, although in the past week New York and Washington, D.C. actually saw some of the biggest gains, she noted.

Angel Oak Mortgage, Inc . (NYSE: AOMR) CFO Brandon Filson sees the non-qualified mortgage (QM) loan segment reverting over time to its historical level of about 10% of the overall mortgage market, compared to 2% today, providing the mREIT with significant opportunity for growth in the years ahead.Speaking on the REIT Report, Filson noted that 10% of the overall market would be about $200 billion, versus about $25 to $50 billion today.Angel Oak Mortgage, which went public in June 2021, focuses on acquiring and investing in first lien non-QM loans and other mortgage-related assets in the U.S. mortgage market. Non-QM loans are not backed by government agencies and are aimed at homebuyers unable to meet the strict criteria of a qualifying mortgage in areas such as income or personal debt.

Business models are central to corporate performance and wealth creation, and even the most complex models can be reduced to six basic variables, says Chris Volk, a veteran REIT executive, business leader, and author.Speaking on the REIT Report, Volk discussed his upcoming book, The Value Equation, which will be published on May 10.Volk also discussed his career, during which he introduced and led three public companies. One of those was STORE Capital Corp. (NYSE: STOR), his third net lease iteration, formed in 2011. Combined, the companies provided more than $20 billion in growth capital to thousands of businesses, he said.

Capital flow of non-traded alternative investments could grow to a $250 billion a year market within the next five years, with early 2022 data already pointing to a record-breaking year for fundraising in the sector, according to the Institute for Portfolio Alternatives (IPA).Speaking on the REIT Report on April 18, Anya Coverman, SVP, government affairs and general counsel at IPA, said the outlook for 2022 is “incredibly bright. You have Blackstone, Starwood, and other large asset managers leading with a blockbuster year.”Citing research data from Robert A. Stanger & Co., Coverman said sales overall are topping $19.1 billion in January and February. “So, this is already on pace to beat last year's record tally of $70 billion.”

Outside of the industrial sector, residential real estate in the United States “probably has the best supply-demand backdrop in global real estate right now,” says Ryan Dobratz, portfolio manager of the Third Avenue Real Estate Value Fund.Speaking on the REIT Report, Dobratz said he sees “a significant amount of demand for single family housing, in particular within more affordable Sunbelt markets, at the same time that supply is very, very low.”Companies active on the home building side are seeing benefits, Dobratz said, including timber REITs. Timber REITs are going to be able to generate much higher levels of cash flow and ultimately pay much higher dividends, given residential market conditions, he noted. “Timber is also a terrific place to be invested in an inflationary environment.”Dobratz pointed to the war in Ukraine, supply chain issues, and high inflation as issues of macro concern right now. At the same time, he noted that “commercial real estate has historically been a great place to park capital and to protect it from inflation over time.”

Proposed Securities and Exchange Commission (SEC) rules to enhance and standardize climate-related disclosures for investors are just the first step in terms of finding the right balance of what's required from a regulatory perspective, said Uma Pattarkine, a senior investment strategy analyst and global ESG lead for CenterSquare Investment Management.Pattarkine told the REIT Report that the SEC proposals were “a lot more robust than I had originally anticipated,” given the level of initial disclosure, and require REITs to be able to get a lot of that data at the property level.Many REITs, Pattarkine said, are already committed to science-based targets. For such companies, the SEC proposals will not impose any additional burdens. However, for REITs that have been lagging in terms of collecting data, “it's going to take a lot of work for them to get to what the SEC might require from a disclosure perspective.”

Laurie Baker, COO at Camden Property Trust (NYSE: CPT), says the importance of gender equity and diversity within the commercial real estate industry has been amplified as a result of the pandemic.Speaking on Nareit’s REIT Report, Baker said that while more women are rising to key leadership positions across the industry, the pandemic “in many ways stalled the progress that was being made because they [women] were disproportionately forced to choose between careers and caregiving for their family.”At the same time, Baker said, the pandemic also presented opportunities in the form of new forms of flexibility and “resetting definitions of career satisfaction and what company success and personal success is.”Baker, who was named COO in late 2021, also reflected on her more than two decades at Camden, including her work implementing pioneer revenue management technology as well as helping to create Camden’s first investment funds.

Dallas Tanner, president and CEO of Invitation Homes Inc. (NYSE: INVH), says the REIT’s $250 million investment in Pathway Homes will expand choice in the housing market by helping first-time homebuyers who lack access to traditional avenues to home ownership.Speaking on the REIT Report, Tanner said Pathway, launched in partnership with Regis Group and Fifth Wall, is an opportunity to support a growing segment in the marketplace—individuals that want a lease option purchase agreement or the chance to build equity in a home over time.Pathway works directly with customers to identify and purchase a home, offering them the opportunity to first lease and then buy the home outright at a future date. In addition to investing in the homes and technology platform for Pathway and its real estate fund, Invitation Homes will provide maintenance and other services to all Pathway homes, enabling the REIT to broaden its third-party property management services.

Committed leadership and statements backed up by substantive action are key to ensuring that organizations make progress on diversity, equity, and inclusion (DEI), according to Kira Banks, co-founder of the Institute for Healing Justice and Equity at Saint Louis University, where she is also an associate professor in the department of psychology.Speaking on the REIT Report, Banks notes that since George Floyd's murder in 2020, more leaders in business are understanding that DEI is core. “They understand it is a part of the work of doing business nowadays.” However, the work won’t be sustainable unless leadership is fully committed, Banks says. “If leadership is not on board, it gives other people an opportunity to opt out.”Banks also says that more organizations are understanding that symbolic statements are insufficient and must be backed up with action. “Those sorts of symbolic gestures in some ways can do more harm than good if they're disingenuous, if they're not followed up by anything substantive,” she notes.

Anticipated interest rate increases of about one and a half percentage points by year-end will still create a “very favorable” environment for commercial real estate, says Nareit Senior Economist Calvin Schnure.Speaking on the Nareit REIT Report, Schnure noted that it is “appropriate” for the Federal Reserve to be raising interest rates at this point and removing the stimulus that was put in place early in the pandemic.Schnure noted that goods inflation has been at about 12% over the past year, while service price inflation has slowed somewhat. “This suggests that we're not having a long- term problem from wage pressures with inflation. I do expect inflation to slow down, mostly in the second half of this year,” he said.REITs, Schnure said, perform better than most other sectors during periods of moderate to high inflation because they represent a real asset that own properties whose values rise with prices and with leases that can respond to changing market conditions.

Transaction activity in the hotel sector this year is expected to be “incredibly strong,” with robust pricing continuing in the luxury resort segment and the start of a recovery in business transient and group demand, according to Kevin Davis, CEO of JLL Hotels & Hospitality, Americas.Speaking on the REIT Report, Davis noted that JLL has more than $12 billion in its U.S. hotel sales and financing pipeline for 2022, the highest level since 2015, which was already a record year from a transaction volume perspective. If JLL is a proxy for the market, “my expectation is that you'll see a lot of transactions this year.”Davis said anticipated gains for 2022 follow a particularly strong year for the industry in 2021. This was fueled by the large amount of capital that had aggregated on the sidelines to take advantage of potential distress in the sector—which never materialized—as well as pent-up consumer demand for travel.

Investing in the farmland sector offers stability, strong income, good total returns, and inflation hedge characteristics, among other benefits, according to Martin Davies, global head of Nuveen Natural Capital.Speaking on the REIT Report, Davies also noted that “one very compelling theme is not being correlated to the economic cycle. Through the COVID-19 pandemic we’ve seen no dip-off in farmland returns. As we’ve seen historically through other economic crises, such as the global financial crisis and the tech bubble, farmland returns stayed strong through that period.”Davies noted that while land values historically have been a function of what was actually produced, going forward there could be increased opportunities to monetize some of the additional benefits that exist, including water quality, biodiversity, and carbon sequestration.

The data center sector is playing a significant role in getting utilities to increase the use of renewables across the electricity grid and bring about the larger goal of a 90% carbon-free electricity system by 2030, according to Breana Wheeler, director of operations at BREEAM USA.Speaking on the REIT Report on Jan. 24, Wheeler noted that the focus on decarbonizing the grid is “really critical, because while reducing energy consumption is important, data centers specifically will always face significant challenges to either build enough renewables to cover total usage or build close enough to an abundant supply of renewable energy.”Wheeler also discussed how BREEAM’s relationship with the data center sector has developed over the years, whether the general perception of data center energy consumption fits the reality, and how the data center sector is having a positive knock-on effect in terms of making other industry sectors improve their sustainability performance.

Prologis, Inc . (NYSE: PLD) Global Head of Capital Deployment Dan Letter says ongoing efforts by companies to rebuild inventories to pre-pandemic levels, and a focus on resiliency rather than efficiency in the supply chain, will create multi-year tailwinds for the REIT.Speaking on the REIT Report, Letter noted that inventory to sales levels are 10% below where they stood pre-pandemic. “Our customers are just trying to get back to the pre-COVID levels, let alone build that new safety stock on top of that,” he said.Letter said he expects supply chain challenges will persist into 2023. Vacancy rates are at unprecedented lows and space in Prologis’ markets is effectively sold out, he added.Prologis continues to see broad based demand in markets around the globe, according to Letter. The REIT is planning to start over $5 billion in developments this year, and also expects to make about $1.5 billion in acquisitions. In addition, Prologis’ land portfolio will allow it to develop over $26 billion of new product.

With a footprint heavily weighted toward the Sunbelt, plus an expanding portfolio of necessity retail assets, Michael Weil, CEO of American Finance Trust, Inc. (Nasdaq: AFIN), says the REIT is well-positioned for 2022 and beyond.Speaking on the REIT Report podcast Jan. 12, Weil said the company’s proposed $1.3 billion acquisition of shopping center assets from subsidiaries of CIM Real Estate Finance Trust, Inc., combined with its upcoming rebranding to The Necessity Retail REIT Where America Shops, spells out its clear focus on a particularly active corner of the retail sector.Since the REIT’s listing on Nasdaq in 2018, it has focused on single tenant and multi-tenant retail, with the latter in the form of open-air shopping centers.“We think it's an incredibly viable, strong asset class and it creates a portfolio that has terrific underlying strength,” Weil said. Over the last four or five years, as the REIT has continued focusing on necessity retail, it has grown from about $3.4 billion of assets to a projected $5.1 billion.

The REIT industry is closing out 2021 in a position of strength, with ample financing available, brisk merger and acquisition activity, high and rising rents, and elevated asset levels, according to Evan Hudson, partner and real estate capital markets legal expert at Stroock.“The credit markets are incredibly active, they’re liquid, they’re deep,” Hudson said. He noted that in addition to common and preferred equity deals, largely through at-the-market (ATM) offerings, his firm is also seeing a high level of joint venture activity.Following a productive year for M&A deals in 2021, Hudson expects all property sectors to be active in 2022. “Even though we have price agreement (between buyer and seller) and the price is very high, a lot of deals are still happening.” He stressed that what is new in the current environment is the entrance of “colossal” non-traded REITs with hefty amounts of cash to deploy.

The economy will enter 2022 on a firm footing and should be able to withstand a variety of challenges that have emerged in recent months, providing a backdrop for continued solid REIT performance, says Nareit Senior Economist Calvin Schnure.Schnure noted that the economic mood has shifted over the last couple of months, reflecting the new Omicron COVID-19 variant, supply chain issues, price spikes, and labor shortages, among other issues.“Overall, though, the economy is quite sound. It has a lot of strength and should be able to handle these challenges pretty easily in the year ahead,” Schnure said, particularly since many of the current challenges are related to the pandemic and should ease as COVID cases come down.As for the hot topics of inflation and interest rates, Schnure pointed out that inflation is still very connected to short-term bottlenecks. “We’re going to see continued concern about inflation, which the Fed is going to be watching closely,” he said, with gradual increases in interest rates likely to begin around the middle of next year.