Don't rush into REITs
(MONEY Magazine) -- You'd think that investors would be leery of companies that own and manage commercial real estate. Vacancy rates remain elevated in office buildings and shopping centers. Except for apartment buildings, rents really haven't grown at all in four years. And given the possibility that the global economy may retrench yet again, things could still get worse before they get better.
Yet last year, nine times as much money poured into funds that invest in real estate investment trusts, or REITs, as did in 2009.
What's behind this rush of investors? The same force that sent tens of thousands of Americans racing into Oklahoma in the great land run of 1889: the hope of nabbing property that could help sustain them.
With bonds paying next-to-nothing interest rates, yield-starved investors are hungry for payouts, and REITs pass along the vast majority of the income their properties generate. The yield on equity REITs, which own and manage commercial holdings, averages just under 4%, though some are paying much more.
By historical standards, that's actually modest. When pitted against the sub-2% yields on 10-year Treasuries , though, or the 3% payout of a total bond market fund, REITs shine.
"It is a hunt for yield," says Mark Luschini, chief investment strategist at Janney Montgomery Scott, noting that investors don't seem to care where they have to go to collect income as long as they're being paid.
Therein lies the problem.
Over the long run, REITs deserve a 5% to 10% stake in your portfolio because they are a good hedge against inflation and help diversify your sources of income.
For instance, while your bonds might be hurt if inflation and interest rates were to rise in an improving economy, equity REIT income could thrive. "We think REITs can grow their dividends at least 6% a year, and if inflation is running at 3%, your purchasing value is not being eroded," says Thomas Bohjalian, a portfolio manager at Cohen & Steers, an investment firm specializing in real estate.
Malls In Oklahoma - News
The portfolio is secured by three regional malls located in tertiary markets within Texas and Oklahoma. The anchor tenants at all three properties face near-term lease expiration, scheduled to take place prior to loan maturity in December 2014.
Vacancy rates remain elevated in office buildings and shopping centers. Except for apartment buildings, rents really haven't grown at all in four years. And given the possibility that the global economy may retrench yet again, things could still get
Pass fast-food restaurants and big-box stores and strip malls and endless commerce that becomes a blur. Where the flashing signs and the digital billboards begin to thin, turn into another neighborhood. The brick homes are a wee bit bigger here,
![[cre blog] The backbone of the retail real estate market](http://nt3.ggpht.com/news/tbn/V-oCvXaCnr296M/6.jpg)
By Darren Currin Columnist Darren Currin writes the blog "Oklahoma per Square Foot." See his and all our blogs at journalrecord.com/blog-hub. Grocery-anchored neighborhood shopping centers have long been considered the backbone of the retail sector of
Bob Symonds was born in 1898, grew up in Iowa and had been involved in real estate in Oklahoma, Santa Monica and Florida before he and his family returned to California for good in the early 30s. Symonds worked as a realtor and car salesman in the
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