Will Strong Demand For REITs Continue?

David Lari co-wrote an article published by National Real Estate Investor on July 8, 2013 about investors' renewed interest in REITs. According to the article, interest in real estate-related investments, particularly those involving healthcare and multifamily housing, have gained “significant momentum” in recent months. Retail and single-family housing are also starting to see some growth.
 
As Lari and co-author Lesley Solomon note in the article, the demand for REITs has continued to grow because their returns have outperformed many other investment alternatives (17.8 percent annualized return from 2010 to 2012, compared to 10.9 percent for the S&P 500).  In addition, they note that “[b]y law, REITs must distribute at least 90 percent of their taxable income each year to their shareholders, generally in the form of regular cash dividends. This ability to receive cash dividends is another major factor contributing to the strong demand of REITs.”
 
Between Jan. 1 and May 31 of this year, equity REITs raised roughly $29 billion in new capital, nearly 20 percent more than they did during the same period in 2012. Mortgage REITs have been similarly successful and are expected to raise approximately $14 billion of debt and equity capital this year.
“Despite expectations of rising interest rates, many observers believe that REITs will continue to thrive throughout the remainder of 2013 and in the foreseeable future,” Lari and Solomon wrote. “With an improving real estate sector and continued strong demand for diversified real estate investments, the horizon for REITs continues to look bright.”