Real Estate Earnings Review
Amid the interest rate-driven volatility in the real estate markets, it's easy to lose sight of the underlying real estate fundamentals, which remain healthier than the 15%+ recent decline in REIT valuations would otherwise suggest. In this report, we look past recent price movements and analyze the recently released NAREIT T-Tracker data to review 4Q17 earnings from a purely fundamentals perspective.
The post-recession period was particularly favorable for real estate owners. Until recent years, demand growth significantly outpaced supply growth, as development activity was stymied by tight credit conditions, limited risk appetite, rising construction costs, and burdensome financial and zoning regulations. This disequilibrium resulted in tight rental markets, allowing REITs to realize robust rent growth - more than double the rate of inflation - for most of this decade.
