Portfolio Managers Guy Barnard and Greg Kuhl join Adam Hetts, Global Head of Portfolio Construction and Strategy, to discuss REITs’ performance to date and the impact of stagflation concerns, rising rates, and higher energy and other input costs on the sector.

Key Takeaways

  • Year to date, global REITs have delivered returns in the middle of global equities and global government bonds, providing a more resilient, defensive income stream, with typically less exposure to short-term earnings from the global economy.
  • Stagflation and rising energy costs remain a risk. Landlords with pricing power are increasingly differentiating themselves and should see more resilient demand and growth.
  • Should bond yields and interest rates move significantly higher, this could impact property capital values. However, most REITs have been very proactive in recent years in extending and fixing their debt book, which should reduce their exposure to short-term rate rises.
  • There is an increasing focus on the sustainability of buildings, particularly in the office market where there is a huge polarization in tenant demand and asset value between more sustainable, environmentally efficient, lower energy-cost buildings and those that lack these characteristics.