Institutional investors are now allocating more capital to REITs than private equity, according to research from Nareit showing that REITs have historically outperformed broad equities during late-cycle periods.
Publicly-traded office REITs have performed well in 2019, but it’s prudent to remain cautious. Make sure to evaluate the individual underlying properties in any broader portfolio, and be aware of concentration to markets that may exhibit oversupply or potential for large occupancy swings. For example, Streitwise targets best in class office properties in secondary markets that have some of the best rent growth in their regions and modest development pipelines, while the New York office market may be in for a period of underperformance. Real estate is, and always will be, a local phenomenon.
It’s also important to consider the type of REIT in which you’re investing. While publicly-traded REIT’s are subject to significant swings in the stock market, such as in Q4 2018 when the S&P 500 dropped by 13.5%, non-traded REITs do not mark values to market daily. Of course, publicly traded REITs do offer daily liquidity, but it may come at the expense of a higher return due to the liquidity premium.
We think it’s important to keep a balanced portfolio of investments to offset the ebbs and flows of the stock market. While all investments carry risk, REITs have been a consistent source of income generating alternative investment for many years. And we’ve been fortunate enough at Streitwise to have delivered our investors 10% dividends since inception.
Mr. Karsh is CEO and Co-Founder of Streitwise and Tryperion Holdings.
Prior to forming Streitwise, Mr. Karsh was an Acquisitions Analyst for Canyon Capital Realty Advisors and the Canyon-Johnson Urban Funds, where he was responsible for underwriting, structuring and executing value-add and opportunistic transactions. He holds a Bachelor of Arts degree in Political Science from the University of Pennsylvania. Mr. Karsh is a member of ULI and is also a Real Estate & Construction member of the Jewish Federation of Greater Los Angeles.