REITs are gaining steam as the global economy improves.

The pickup in developed economies means that growth in demand for office and retail space is outstripping supply, says Jason Yablon, global portfolio manager at Cohen & Steers in New York. His firm manages the Renaissance Global Real Estate Fund.

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“What drives [real estate] stocks and fundamentals is the supply and demand for the underlying space,” he adds. If both are moving up due to global growth, then “that’s an environment where you can raise rents and fill up buildings.”


In fact, Yablon finds REITs have historically performed well in growth environments. Active management is important, though, since he suggests you help clients play strong sectors and reduce volatility.

Global trends

In the U.K., rents and occupancy rates are rising.

Downtown London has retail and office vacancy rates of just 2% (in the West end) or 3% (downtown), says Yablon, so his portfolio is now overweight in real estate assets in these areas. When there’s “very little vacancy space on the market,” more opportunities arise.

So, he owns some of the developers since “those companies are creating a lot of value through their development pipelines,” says Yablon. “They’re going to be bringing new space to the market,” which will increase rents and investment values.

Read: Branching into real estate

This is surprising since the U.K.’s recovery has been stark compared to other economies in Europe, he adds. In Britain, many people lost their jobs during the 2008 to 2009 downturn, and consumers reined in spending.

In contrast, different employment laws meant fewer people were let go during the crisis in countries like France. The only downside of that reality is there will be less growth to capture.

In many developed markets across the globe, explains Yablon, economic improvement is creating “a positive backdrop for demand for commercial real estate.” You can help clients find opportunities and manage volatility as markets move. As well, monitor the status of countries that are testing structural reforms.


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