“The overall economic backdrop still paints a picture of low rates enduring for quite some time,” Alexander Goldfarb, a managing director at Sandler O’Neill & Partners, told REIT.com. “The steadily growing U.S. economy, coupled with limited new supply, means that REITs should outperform in 2016.”
Moreover, Werner and Goldfarb point argue that REITs could see continued strength in 2016 as the real estate asset category is elevated to the 11th headline sector in the Global Industry Classification Standard, or GICS. As REITs gain a sector classification, investors may no longer relegate real estate as an alternative investment and funnel more money into the area as part of a diversified equity portfolio.
Werner also believes that reforms to the Foreign Investment in Real Property Tax Act (FIRPTA) could also bolster capital flows into the sector.
“These reforms should provide for easier flow of capital from foreign investors into publicly traded REITs and high-quality commercial real estate,” Werner said.
Vanguard REIT ETF
Max Chen contributed to this article.