US real estate sector expected to continue growing in H2 of 2019

Once-sleepy the real estate sector of the United States can be to carry on its into the second half of 2019 however investors are choosy in their bets on property companies.

Whereas Reits (residential and industrial Real Estate Investment Trusts) are the most popular bets, retail is out of favour and office Reits look less attractive.

So far in 2019, the dividend-rich, slow-growth S&P 500 Real Estate index has risen 18.5% and beats the S&P 500’s again 16.99%. Unless the tide turns, since 2014 real estate is on track for its biggest yearly advance. 

Sector investors are hopeful that Reits can advance more as long as broader earning of the United States growth stays weak and interest rates remain low.

Macquarie Investment’s chief investment officer for real estate, Bob Zenouzi, said, ‘If the Fed policy is kind and you don’t see a speeding up of earnings, (Reit) dividend yields and balanced cash flow are attractive to investors’. He sees Reit dividend yields of 4.5% and growth of cash flow of 4 to 5 % by bringing a high-single digit to low-double digit percentage return rate for investors of Reit in the coming 12 to 18 months. 

Director of Reit research at Green Street Advisors Cedrik Lachance, said that the residential Reits are benefiting from trends like ‘limited supply and pricing power that is fine to huge depending on the subsector’.

The FTSE Nareit equity housing index has increased 17.8 % till this year, just lesser than the broader S&P Reit index.

Investors support the sector, which comprises warehouses used by online retailers like Amazon.com, over customary retail malls that have struggled badly. 

Green Street’s Mr. Lachance said that ‘we are cautious about the office trade.  There has been a fine amount of supply and at the same time there has been also a trend in towards densification. You are sitting closer to your equals than you were ahead of.’