When the residential housing market crashed this past decade, many people stood confused and surprised that the commercial side didn’t follow suit. No one cause has been found to explain this stability, but an article was just published by Frank Packer in the Journal of Portfolio Management lists REITs as the main contributer.
REITs, or real estate investment trusts, occupy large portions of commercial markets. The study claims that their involvement in the market led to commercial projects having a certain level of transparency that residential didn’t have, and that just might be what saved them. As a company, REITs are interested in being perceived as stable. Overvaluation or undervaluation of a REIT can be a good indicator of the market and specific properties, leading to a higher level of investor confidence and knowledge.
Regardless of whether or not this was the end all cause for the stability seen in commercial markets, it definitely contribued a good deal. Commercial properties have often been viewed as a pillar of stability and growth, and continue to strive even in tough times.