Investing August 2, 2001

REITS, REOCS Slip Despite Soft Stock Markets

August 2, 2001 (PLANSPONSOR.com) - Public markets' ownership of real estate declined across all property types last year, despite a softer stock market during 2000, its first decline in four years.
Reported by

According to a report from Prudential Real Estate Investors (PREI), the declines in ownership through real estate investment trusts (REITs) and real estate operating companies (REOCs) ranged from:

  • a 0.4% decline for non-mall retail properties,
  • to a 0.5% slip in apartments, offices and warehouses,
  • to a 2.2% decline for mall retail properties

A shrinking supply of capital was cited as a factor in the decline, although the fall in the equity markets was perceived to have led investors to alternatives assets, such as real estate.

In the first five months of the year REITs have raised almost two-thirds as much in new financing as they did during all of 2000, according to the report.

PREI said the decline in public market real estate ownership stems from three trends in the marketplace:

  • sales outstripped acquisitions as companies took advantage of favorable market conditions and focused portfolios on core assets
  • REITs and REOCs failed to keep pace with the growth of commercial real estate brought about by new development. Office construction accelerated while construction of other property types held steady.
  • the number of large participants fell as publicly traded real estate companies merged or privatized.

A full copy of the report is available on PREI’s website at http://www.prudential.com/inst/business/prei/itbrz1004.html .

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