The REIT Weekly – Growth Signs from Single Family, Medical Office, and Hotel Sectors

Indicators suggest that single family housing, medical office buildings, and the hotel sector have and will continue to experience growth.  Also, the FTSE NAREIT All REITs index indicates strong performances and additional expansion within the industry.

Construction of single family homes has grown to a 696,000 annualized rate last month following a drop in the construction of apartments. “Conditions in the housing market are at least stable, and on the margin they appear to be improving a bit,” said Ryan Wang, an economist with HSBC Securities USA Inc. “We should expect continued gradual growth heading into next year,” he added. Emerging housing projects remain a reflection of the increasing demand for single and multifamily housing units within the market.

According to a report from financial service firm JLL, hotel occupancy levels are expected to reach 65 percent by 2016. Due to limited development within the industry, debt financing, social media, and the rise of hotel commercial mortgage backed securities, hotel transactions are booming at record levels with a reported $25 billion in volume. “In many of the top 50 markets, we are seeing levels that we haven’t seen in some time. As occupancy continues to rise to historic highs, that would be an indicator of strong rate growth to continue as well,” said Dan Hansen, president and CEO of Summit Hotel Properties (NYSE:INN).

Among strong earnings in the health care, industrial, and residential, sectors, REITs are continuing to outperform the broader market. The FTSE NAREIT All REITs Index was up 8.7 percent for October and gained 23 percent by the end of the month. “There’s not a lot of development across most sectors, and that’s helping boost core growth. It’s a really good, positive environment for REITs,” said Paul Morgan, managing director at MLV & Co.

During Revista’s National Executive Forum, industry experts discussed the rising market for medical office buildings (MOBs). As a $300 billion sector, MOBs are becoming more of an accepted asset class. Revista’s database encompasses more than 31,000 medical office building properties comprised of over 1.2 billion square feet. Experts predict that the MOB sector will experience continuous growth as investor interest increases in the healthcare real estate market.