Commercial property owners face some daunting challenges, as I discussed in a recent article, which makes me bearish on REITs overall right now. A credit crunch is spiking just as property market conditions are softening – a deadly combination for many owners. Broad expectations of an economic downtown, if not a recession, portend even tougher times ahead, particularly in the office and multifamily sectors.
The economy will, indeed, eventually lapse into a recession – eventually – though even the bears keep pushing out their recession forecasts, calling into question the usefulness of these outlooks in making investment decisions. But here’s the key insight: Though REITs certainly perform better when the economy is growing than when contracting, It may not matter much for how REIT investors position their portfolios whether the economy actually turns down or just slows without falling into a recession, as REITs usually perform similarly in both situations.
My analysis and views on Seeking Alpha.
Posted: by Andrew J. Nelson
