Prices of retail and industrial Reits have yet to reflect risks, says Nomura
REAL estate investment trusts (Reits) are likely to experience more drops in asset values and negative rental reversions, a
Furthermore, the research house believes that prices of retail and industrial Reits have yet to reflect these risks.
‘With asset values likely to see further downward adjustments, the fact that retail and industrial Reits are now trading near to or at premiums to book value appears somewhat inconsistent with property market trends,’ wrote analysts Tony Darwell and Sai Min Chow in an Oct 16 report.
Investor interest has returned to Reits in the last few months as the sector largely managed to refinance its loans. The FTSE Real Estate Investment Trust Index has risen by more than 50 per cent since the start of the year.
But Nomura believes that downside risks remain. It estimates that capitalisation rates – a rough measure of properties’ rates of return – have softened by around 25-75 basis points and could drop by another 25-50 basis points. Continue reading
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