Commercial real estate is solidifying its place and outperforming the broader U.S. stock market. According to the National Association of Real Estate Investment Trusts, the stock exchange-listed U.S. equity real estate investment trusts rose 16.25 percent with a dividend yield of 3.52 percent in the first-half of 2014.
Led by multifamily apartment demand, self-storage and even some momentum in regional malls, commercial real estate has recovered quickly. Office is improving in major urban markets.
The real driver, however, for REITs is the low interest rate environment. Analysts were concerned with multifamily rental apartment buildings, the hottest REIT sector, last year. They were worried thousands of new units under construction would overwhelm potential demand.
Today, rental demand is stronger than ever and rents to continue to rise. According to a recent report by Freddie Mac, the supply of new multifamily units is absorbed by demand, and market fundamentals are expected to stay strong over the next two years. Student housing REITS, along with industrial warehouse and self-storage, are also showing strong earnings.