REIT Internet Acquisitions Hit File Top Of $67.8 Billion In 2021

REITs had been on a purchasing spree, making $67.8 billion of internet acquisitions in 2021. A number of elements have contributed to those purchases, together with a strong restoration in underlying assets markets and cast outlook for long run enlargement, a low price of capital, and powerful steadiness sheets which can be in a excellent place to give a boost to this growth in their actual property portfolios. And whilst the battle in Ukraine has injected new dangers and uncertainties into the outlook, the standards that supported REIT acquisitions ultimate yr go away them well-prepared for the trail forward. (Complete disclosure, I’m Senior Economist and SVP Analysis Research at Nareit, the global consultant voice for REITs and indexed actual property.)

As publicly indexed corporations, REITs continuously factor commonplace inventory to boost capital to fund their acquisitions. Top and emerging proportion costs lower REITs’ price of capital, and in addition normally sign marketplace self belief one day potentialities for income-producing actual property. The 41.3% general inventory marketplace go back via REITs in 2021 supplied each a powerful sign to amplify and in addition low cost get right of entry to to the capital required to take action. Certainly, REITs raised a document $126.9 billion in 2021 thru issuance of commonplace fairness, most popular fairness, and unsecured debt.

REIT acquisition job larger regularly throughout the yr, to $26.7 billion within the fourth quarter. Process used to be broad-based, with 9 of the 12 assets sectors having certain internet acquire job, consistent with the Nareit T-Tracker^®. Self garage REITs and home REITs led the way in which, with $7.0 billion and $6.2 billion internet purchases, respectively. Those assets sectors had been red-hot all over the pandemic. Different sectors with important internet acquisitions come with retail REITs and well being care REITs, with $5.5 billion and $2.8 billion, respectively. Those sectors got here below power within the early levels of the pandemic, inflicting disruptions that ended in alternatives for repositioning and consolidation.

Those acquisitions come at a time when REIT working efficiency and monetary efficiency are each at the upswing. Occupancy charges of all houses held via REITs rose to 92.3%, an building up of 325 foundation issues from the low level reached early within the pandemic, and feature just about returned to their ranges previous the pandemic. Throughout assets sectors, occupancy has risen a number of the rental, commercial, and retail REIT sectors, whilst occupancy charges have endured to say no within the administrative center sector.

Monetary efficiency has benefited as stipulations in assets markets have firmed and occupancy recovers. Certainly, after having declined in 2020, income of the REIT sector (as measured via price range from operations (FFO)) rose 24.6% in 2021 to a document prime of $64.8 billion.

REITs have bolstered their steadiness sheets over the last decade, lowering their leverage and locking in low rates of interest for nicely into the longer term. This cast monetary place has now not most effective facilitated the new wave of acquisitions, however has additionally diminished exposures to conceivable will increase in rates of interest or different shocks in monetary markets within the months and years forward.