Going by the analysis of the real estate segment, the market scenario is favourable for those renting out property.
In view of the rising demand for accommodations, shops and commercial sites, the market analysts said that rents are expected to go up bringing additional profits to the real estate owners.
REITs — the FTSE NAREIT Index fell 2.2% this year, while the Standard & Poor's 500 index surged 1.2%, indicating high prospects for added profit margins for the real estate market players.
“Even so, investors' concerns about the impact of rate hikes on REITs are overblown. I believe that real estate REITs are undervalued and will generate better returns in the aftermath of a rate hike,” said Marc Halle, Managing Director and Head of Global Securities at Prudential Real Estate Investors.
Halle has been handling real estate investment trusts in industrial, retail and storage space. His area of operation includes apartments too. REITs units are operational in the US, Europe, Asia and Latin America.
Halle said past records revealed that REITs have performed well every time there was a hike in the interest rates. He explained that the logic that works behind this is the demand and supply business in the market.
According to him, each time rates surge, investors tend to recalculate the asset values and find it significant to look for discounts. The discounts specifically benefit the private market during the rate hikes, he said.