The supply and demand landscape for a range of REIT sectors was the focus of an Oct. 17th webinar in which Abby Corbett at Cushman & Wakefield, Nick Joseph at Citi Research, and John Worth at Nareit joined Bloomberg Intelligence REIT analysts Jeff Langbaum and Lindsay Dutch.
Worth opened the webinar with a review of REIT performance, noting that the sector is currently slightly net positive for the month of October. He also pointed out that REITs raised more than $15 billion in the capital markets during the third quarter. Year to date through the third quarter, REITs have raised more in the capital markets than for 2023 as a whole. “This will be a source of competitive strength for REITs as we get into recovery mode,” he said.
The discussion then turned to specific REIT sectors, starting with industrial. Corbett said the sector has been recalibrating as consumers have shifted spending more toward services. Higher interest rates have also dampened demand. Looking ahead, rate cuts will help spur consumer demand, she said. Sector rents should trend higher in the next few years amid increasing demand and easing supply, she added.
Joseph pointed to an improvement in the industrial supply picture in the next 12 months, with demand as “the wild card.” He noted that demand should start to inflect positively in the next six to nine months. Southern California remains a soft market, and “ground zero” in terms of rent growth, he said.
As for the residential sector, Joseph said Citi continues to like multifamily. The majority of supply delivered in 2024, and at least into the first half of 2025, is in the Sun Belt, he said. During 2024, net absorption in the Sun Belt has been strong, he said, which has enabled rent growth to hold up reasonably well.
Corbett noted that the Northeast is now the most active market in terms of residential construction. The Sun Belt, she said, could see a recovery take shape that is more positive than expected.
Turning to data centers, Corbett pointed out that the availability of power is one of the main obstacles to new construction. Worth noted that this challenge provides an advantage to incumbents, like REITs, that are already active in the space. He also said more activity is likely in the form of large institutional investors partnering with REITs to gain access to their data center portfolios.
On the retail side, Joseph observed that REITs should perform well given “pretty minimal” supply levels. Corbett said the sector should benefit from accelerating consumer demand around mid-2025 in response to lower rates.
For office, Joseph pointed to the sector’s strong performance in the last three months but noted that “geography does matter.” New York City office leasing has been better than expected while the West Coast continues to struggle. “We’re still hesitant on office,” he said, with “more challenges to be faced before we face a meaningful inflection point.” Corbett, meanwhile, noted that 30% of class A office space is seeing no vacancies.
Senior housing was the final sector discussed. Joseph said the next 20 years should see strong growth in the senior housing population against a backdrop of limited supply for at least the next three years. Expenses in the sector have also moderated, he added, while acquisition opportunities have increased.
To watch the webinar on-demand, please register here.