As the Fed has decided to keep interest rates low, real estate investors wonder how REITs will fare in coming months. Since the Federal Reserve’s decision last week, REITs have outperformed the S&P 500. Earlier this year, real estate investment trusts trailed the overall market because of the approaching decision to potentially raise interest rates. Increased rates could have drawn investors away from REITS, and more towards bonds. Keeping interest rates down could potential result in more enthusiasm for REIT shares, but “general investors” are not exactly lining up to invest in real estate trusts.
Real estate companies giving out long-term leases, like health care companies in particular, have been the most successful. Other REITs, such as Simon Property Group Inc., are more volatile given their increased exposure to consumer finances. Taking rates out of the equation, REITs seem to be a decent investment at the time. Construction levels are moderate, limiting the supply of new buildings causes rents to rise. Investors would like to see more confidence reflected in interest rates, but until then, executives are trying to increase value by “pursuing joint ventures and trying to streamline operations.”