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