GREITs - not drowning, waving! - Resolution Capital

Andrew Parsons at Portfolio Construction Forum Markets Summit 2024

GREITs – not drowning, waving!

Global REITs have been overwhelmed by the rapid rise in interest rates, headlines about the demise of the office, and concerns over bank lending to commercial real estate. These issues mask the reality of an industry in strong shape. With lower financial leverage, well-laddered debt maturities and diversified sources of debt, GREITs’ capital structures are well positioned. The office sector has shrunk to less than 10% of the global REIT benchmark and in its place are sectors such as data centres, healthcare and logistics that are benefiting from long-term secular growth trends. Rising construction costs and lower risk appetite have curtailed new construction volumes while demand remains focused on modern, sustainable buildings. As a result, economic rents needed to justify new construction are rising and many segments of the commercial real estate market could face undersupply conditions in the medium term. Consequently, GREIT valuations are relatively attractive, trading at a discount to private market real estate values and, in some cases, below replacement costs. Hence, as a store of wealth with a growing income stream, GREITs now warrant more allocation.

Presented by Andrew Parsons, Executive Director & Chief Investment Officer, Resolution Capital, at Portfolio Construction Forum Markets Summit 2024

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