Net Lease REITs: Overvalued, And That's A Good Thing
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- It's been "feast or famine" for Net Lease REITs over the past two years. Facing an existential crisis early last year, the Net Lease sector has been rejuvenated in 2019.
- With an eroded cost of capital - making accretive external growth all but impossible - and inflation rates outpacing internal property-level growth, the outlook looked rather grim last year.
- The macroeconomic regime has shifted dramatically over the last twelve months. No REIT sector loves the Goldilocks "lower-for-longer" economic environment more than net lease REITs.
- The net lease sector has been revitalized by lower interest rates, which has boosted equity valuations and re-opened accretive external growth opportunities that should fuel AFFO growth this year.
- We expect the net lease REIT sector to be the external growth engine of the REIT sector in 2019. Property-level fundamentals have remained steady but retail risks remain.
For an in-depth analysis of all real estate sectors, be sure to check out all of our quarterly reports: Homebuilders, Apartments, Student Housing, Single Family Rentals, Manufactured Housing, Cell Towers, Healthcare, Industrial, Data Center, Malls, Net Lease, Apartments, Shopping Centers, Hotels, Office, Storage, and Real Estate Crowdfunding.
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