US REITs Restarting Development Pipelines, Especially in Multifamily Sector
U.S. real estate investment trusts (REITs) are initiating development projects as they seek higher returns than those available through property acquisitions, says Moody’s Investors Service in a new report.
Investment on new development will be moderate in scope for the near term, however, and represent a fraction of peak expenditures during the height of the real estate cycle a few years ago.
“As low-cost capital facilitates a run-up on acquisition prices of prime properties, development can generate stronger returns, especially for those REITs with land on their balance sheets,” says Moody’s Analyst Jane Cotroneo, who is the author of the new report on REIT development. “REITs have an edge in development as they can self-finance projects, while most private developers are dependent on banks for the limited amount of construction financing that is presently available.”
Moody’s says REITs are ahead of the development curve particularly in the multifamily sector, where fundamentals are strongest.
The full 6-page report US REITs: Modest Restart of Development Pipelines is available at the Alacra Store, along with a complimentary summary.
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