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Key TakeAways from NAREIT: The Bigger Picture

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According to a recent report from analyst firm, RBC Capital Markets, the first day of two at the NAREIT Annual Convention known as REITWorld showed that internal growth continues to be moderate for most sectors.

According to the firm, who completed 20 management meetings with companies at the conference, new deliveries are expected to increase in many sectors in the near term. The company also points out that tighter lending standards, rising construction costs and lack of labor should curtail new starts going forward.

Wes Golladay, an analyst at the firm said that the low cap rate environment will likely curtail acquisition opportunities and the capital markets remain open for debt and preferred equity. “Private market valuations remain elevated across the property types despite dislocation in some sectors such as retail and lodging,” Golladay said in the report.

Sector level thoughts based on the company’s meetings from day one include the following:

Apartments: Leasing has firmed due to seasonality. Urban supply will likely weigh on results, but supply should moderate in 2018.

Community Centers: Tenant demand remains healthy. The second half should benefit from increased economic occupancy.

Healthcare: A strong private bid is pushing portfolio valuations higher, but it is also limiting external growth opportunities.

Industrial: The macro and property-level fundamental remain strong, and there is not currently too much concern in the market.

Lodging: RevPAR growth remains low. Leisure remains strong, group is firm and business travel has stabilized.

Single Family Rental: The supply and demand backdrop remain favorable.

Storage: Growth is healthy, but moderating due to new supply.