Steven Brown, Senior Vice President and Senior Portfolio Manager at American Century Investments, was a guest on the latest episode of the REIT Report podcast.
Brown described the outlook for REIT investing today, noting that most REITs issued earnings growth guidance of around 4% for 2024.
“The REIT earnings outlook still looks very solid,” Brown said. “Demand is better than supply in most property sectors…High interest rates as well as the high cost of construction have begun to slow supply in many of the markets we invest in. “We think the picture is improving…REIT earnings growth in 2024 and 2025.”
During the interview, Brown also said that:
- REIT sectors with pricing power today include data centers, senior housing, regional malls, community shopping centers, single-family rentals and manufactured housing.
- Public real estate pricing is more efficient than private. “When we see REITs trading at a 10% to 20% discount to private market values, we think that’s clearly a green flag for attractive valuations of public real estate versus private real estate.”
- The M&A theme will continue in 2024 as many publicly traded real estate companies are still trading at a 15% to 20% discount to NAV versus private market values.
- Construction work is likely to decline in 2025 and 2026, not because markets are soft, but because construction costs have increased so much that returns are no longer attractive for developers. “This will bode well for the earnings system.”
