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  • Alex Pettee, CFA

Net Lease REITs: Overvalued, And That's A Good Thing

  • To read the full report, click here to visit Seeking Alpha!

  • 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.


Disclosure: An investor cannot invest directly in an index and index performance does not reflect the deduction of any fees, expenses or taxes. The information presented does not reflect the performance of any fund or other account managed or serviced by Hoya Capital Real Estate. We consider the information in this presentation to be accurate, but we do not represent that it is complete. It should not be relied upon as the sole source of suitability for investment. Please consult with your investment, tax or legal adviser regarding your individual circumstances before investing. Visit our website for a complete definition of all indexes cited in this report. Investing involves risk and loss of principal is possible.


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Hoya Capital Research & Index Innovations is an affiliated index provider and research firm that builds custom indexes tracking U.S. commercial and residential real estate sectors, including indexes tracked by exchange-traded funds (ETFs). 

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