Nareit Senior Vice President of 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.”
At the same time, REIT balance sheets are sound, with 87% of debt fixed rate, Pierzak noted. Meanwhile, access to unsecured debt “has really provided REITs with a competitive advantage over many of their private real estate counterparts.”
Elsewhere in the interview, Pierzak noted that Nareit completed a recent analysis which revealed how actively managed REIT funds have shifted their allocations over time from traditional property types to modern economy sectors. “REITs really offer an efficient, cost-effective way to access high quality properties and best-in-class operators for both traditional and modern economy sectors,” he said.