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Quarter-End Insights

Real Estate: Expect Some Choppy Waters Ahead

Our real estate outlook remains stable for now and operating fundamentals continue to be healthy, but risks are due to increase as markets get deeper into the cycle.

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  • Morningstar's real estate coverage is trading at a 3% premium to our fair value estimates.
  • In the U.S., our preferred property sector remains healthcare: HCP, Welltower, and Ventas.
  • We continue to view themes in commercial real estate as generally defensive in nature. REITs have been focused on repositioning and strengthening their portfolios, deleveraging, and capital recycling. Construction of new property continues, however, as firms look for higher returns, putting into question levels of new supply as economic uncertainty remains.

 

Edward Mui does not own (actual or beneficial) shares in any of the securities mentioned above. Find out about Morningstar’s editorial policies.