Tuesday, March 6, 2012

10 Stocks That Show the Real Estate Boom Has Arrived

By Frank Byrt   3/6/2012


(Story updated to add that Simon Property Group is in agreement to develop a retail outlet center in Shanghai.)

BOSTON (TheStreet) -- The U.S. real estate market is in two worlds, with residential housing in the dumps and not yet worthy of consideration for investing. But commercial real estate, in the form of real estate investment trusts (REITs), is prospering.
For example, demand for rental apartments is booming because an uptick in employment has people relocating to areas with job opportunities. While at the same time, home ownership is at 12-year lows and not seen growing significantly anytime soon, and that boosts the earnings outlook for apartment-owning REITs.
And demand for commercial real estate, which includes shopping malls, office buildings and storage facilities, is showing steady growth, aided by years of almost no new construction, limiting supply, while a strengthening economy increases demand.
"Help from the current, very modest recovery has been enough to lift occupancy and rental rates for an industry group that includes office buildings, shopping malls, warehouses, industrial spaces, apartments, and hotels, to name a few," Fidelity Investments said in a research note. "These positive fundamentals have, in turn, boosted net income for REITs."
That recovery has been little noticed by many individual investors, given their still-strong memories of the mortgage-backed securities crisis and the plunge in residential home values, which has poisoned their views on all things real estate.
But REIT securities have been climbing since March 2009. The benchmark FTSE NAREIT Equity REITs Index is up 5.8% this year versus the S&P 500's 9.3%, after gaining 8.3% last year compared to the S&P 500's 2.1% rise. And that was after two straight years of 28% annual increases in the FTSE NAREIT Equity REITs Index.
Industrial property REITs are doing the best this year, with a 15.6% return, while mixed use (office and industrial) REITs are up 13%. As for residential REITs, S&P Capital IQ recently raised its fundamental outlook for the sub-sector to "positive" from "neutral."
"In our view, many Americans may ...
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