"Last mile" demand continues to fuel industrial sector's fundamentals | Fed's Dudley signals rate increase ahead | A comparison of US and global REIT returns
September 26, 2017
The daily source on REITs and real estate investment
Now averaging a record $5.35 per square foot, rents in industrial facilities are positioned to rise further as demand by e-commerce companies for "last mile" product continues to grow. Amazon is the largest tenant for such industrial REITs as Prologis, Duke Realty, Jones Lang LaSalle Income Property Trust and DCT Industrial Trust, and many are scrambling to buy property to further meet demand from this sector.
Federal Reserve Bank of New York President William Dudley has indicated the central bank will continue a gradual increase in interest rates, keeping Treasury yields low. Dudley's comment is one of the first in a series expected from Fed officials that might clarify policy intentions to the bond market.
Investments from listed property companies in emerging markets have been especially strong over the past year, according to the FTSE EPRA/NAREIT Global Real Estate Index Series. Over longer historical periods, however, an analysis by NAREIT economist Brad Case shows risk-adjusted returns from listed US equity REITs have outpaced those from listed real estate in both emerging markets and non-US developed markets.
The US multifamily vacancy rate increased to 4.5% in the third quarter from 4.4% in the second quarter, according to Reis. Construction for quarter was lower than expected at 47,271 units.
Single-family rental REITs can expect insurance to cover most of the property damage they experienced from
hurricanes Harvey and Irma, according to research analysts. Reven Housing REIT has the greatest exposure to the affected areas out of the five publicly traded single-family REITs that SNL monitors but says its cash reserves should cover deductibles.
A panel of retail professionals say changes coming to the retail sector include more tech, such as autonomous vehicles driving people from place to place and artificial intelligence that allows for at-home trying on of clothing. Other changes include retail spaces becoming showrooms and places to get fit and enjoy a meal.
Off-price retailers such as TJ Maxx, Ross Stores and Burlington fare better against Amazon and are expected to see sales growth of $18 billion to $19 billion by 2021, according to JPMorgan. Off-price retailers will play a significant role in supporting brick-and-mortar sales volume going forward.
Cities across North America are going to extreme lengths to woo Amazon's $5 billion second headquarters, which the company expects will create 50,000 new jobs. Hundreds of students at Wharton Business School are working on Philadelphia's pitch; the mayor of Frisco, Texas, has offered to build the city around Amazon; and in Ottawa, Ontario, the mayor of the Canadian capital is touting the country's more liberal immigration policy as a plus for recruiting engineers.
Treasury Secretary Steven Mnuchin is working to overhaul the tax code, but doing so means bridging the gap between the White House and Congress. Republicans are expected this week to release a blueprint of how to change tax policy.
Securities and Exchange Commission Chairman Jay Clayton said in testimony prepared for the Senate banking committee that the SEC should have a fiduciary standard that is "clear and comprehensible to the average investor, consistent across retirement and nonretirement assets and coordinated with other regulatory agencies." He said the effects of the Labor Department's fiduciary rule "extend well beyond the DOL's jurisdiction."
