Macroeconomic strength and REITs
With GDP picking up, the more economically sensitive REITs are positioned to benefit.
October’s data reveals that single family housing starts in the south are up 16.6% month over month. This is precisely the region that CTT supplies and it should bode well for 4th quarter price realizations.
Retail might be losing share to online sales, but the size of the pie still matters and when the economy is stronger, the retail sales pie is bigger.
Hotel data has come in particularly strong with October RevPAR up 4.1% year over year. The weekly data in November has also been quite strong with the particularly strong revenues seen in Houston and Southern Florida. This bodes well for SOHO’s 4Q report.
Industrial news this week was more mixed in that the benefits of the strong economy may be mitigated by increased supply. $2.7B was spent on warehouse construction in October which is the highest number on record.
We are happy to regain exposure to the multifamily sector as the market gifted us with a large drop in IRT on unrelated news. Fundamentals remain strong and IRT has properties in some of the best submarkets in terms of job and population growth. IRT’s CEO, however, is not particularly aligned with shareholders so this is a holding that we will have to watch closely. Independence Realty and UMH Properties both benefit from higher employment and the latest reports indicate that unemployment is quite low. This is made more impactful by the fact that labor participation rates have stabilized which means the low unemployment represents true net job growth.
Commentary may contain forward looking statements which are by definition uncertain. We retain no obligation to update or correct forward looking statements should the available information change. Actual results may differ materially from our forecasts or estimations.