Sunday, October 14, 2007


A Global View Helps Industrial REITs - New York Times

Industrial REITs are overlooked but, right now, have the best returns on investment. Because of long term lease agreements, industrial real estate should hold up well if the economy makes a downturn. But, the focus on industrial real estate is headed overseas - especially to Europe.

WAREHOUSES and distribution centers, often tucked away in far-flung industrial parks or ports, hardly seem as glamorous as the trophy office buildings or splashy apartment complexes and hotels that private equity firms have been clamoring to acquire.

In fact, of the roughly $65 billion in mergers and acquisitions this year involving real estate investment trusts, companies with portfolios of property, only one transaction involved a REIT from the industrial sector, according to SNL Financial, a research company. And that deal was valued at a mere $90.2 million.

But investors in the REITs that develop or own these industrial spaces have been reaping attractive rewards just the same.

In the third quarter, industrial REITs were first among all REIT sectors, with an average return of 13 percent, according to the National Association of Real Estate Investment Trusts; from the beginning of this year through Thursday, the sector was up nearly 14 percent, on average. By contrast, property REITs over all posted a 2.59 percent return, on average, in the quarter and a 1 percent return this year through Thursday, the association said.

Favorable economic conditions have certainly helped, with rising industrial production and job and corporate earnings growth buttressing demand for industrial properties nationwide. Average occupancy rates are now in the low- to mid-90-percent range, up from the high 80’s range just three years ago, according to Christopher Haley, a managing director of Wachovia Securities.


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