Real estate investment market may look different post-COVID-19

Those familiar with the Real Estate Investment Trust market know all REITs are not created equal.

They say that could be especially evident after the COVID-19 global pandemic passes, noting the health crisis could change what kinds of properties REITs own.

Margaret Rhoda, an associate at Harter, Secrest & Emery LLP, says the REIT industry is interesting because it represents a cross section of the economy.

Rhoda previously practiced as a corporate associate in the real estate capital markets group at a Chicago law firm, with a focus that included REITs. She is now part of Harter Secrest’s securities and capital markets group.

One way to determine the health of a REIT is to look at how the tenants are faring, Rhoda says. For example, a REIT that owns brick and mortar stores is likely struggling more than one that may have invested in warehouses for the on-line retailer Amazon.

“Think about what the tenants are facing,” she says. “That should give you information on how a REIT will react and the steps that they may need to be take.”

Rhoda says more facts — and more time — are needed to see how the REIT market lands post-COVID-19, but the same trends the market has seen over the past few years will likely continue to do well.

Those trends show growth in REITs whose holdings include logistics businesses, such as FedEx distribution centers, as well as data centers, she notes. In terms of REITs focused on retail operations, those who have grocery tenants could also continue to do well, Rhoda says.

After the 2008 financial crisis, there was interest in companies with distressed assets, and that may be the case once again.

Industry experts have noted there are certain REIT sectors that are more recession resilient than others, including data centers; grocery-anchored retail centers; certain health care real estate including hospitals and life science companies; self-storage; and wireless infrastructure, such as cell towers.

They say the reason why these REITs tend to be stable during economic downturns is because they remain in demand. There will likely always be a need for data centers, critical infrastructure and hospitals, for example.

Conversely, other REIT sectors — such as retail, lodging and residential — have a higher probability of suffering loses, and recent data supports those theories.

— for full article, see: https://rbj.net/2020/04/21/real-estate-investment-market-may-look-different-post-covid-19/