In 2020, positive contributors to relative performance included an overweight to the cell tower and data center sectors, and stock selection in the residential sector. An underweight to the self storage sector, and stock selection in the office and diversified sectors detracted from relative performance.
Positive contributors to relative performance included stock selection in the shopping center and healthcare sectors, as well as underweight to the office sector. An underweight allocation to the self storage and lodging sectors, as well as an overweight allocation to the cell tower sector, detracted from relative performance.
In the September 2020 REIT Outlook titled, “Welcome to the New Cycle,” we take a break from our theme of ‘essentialness’ to denote the start of a new real estate cycle. We are confident that REIT prices bottomed on March 23, 2020, bringing the previous cycle that started on March 6, 2009 to an end. The previous cycle was the longest on record and produced an annualized total return of +13.7% from trough to trough. Though the bottom for stock prices was March 6, 2009, real estate occupancy did not trough until 1Q 2010. However, investors who waited until trough occupancy experienced annualized returns of only +5.8%, a full 790 basis points (bps) lower per year than those who invested the prior year. As such, although occupancy may not trough until late 2021 or early 2022, we believe investors who add a REIT allocation today will be rewarded. We also believe that COVID and the ensuing recession have exacerbated the differences between the ‘have’ and ‘have-not’ REITs, which will pave the way for further outperformance by active REIT managers in the upcoming cycle.
Previous editions of the Chilton Capital REIT Outlook are available at www.chiltoncapital.com/category/library/reit-outlook/.
An investment cannot be made directly in an index. The funds consist of securities which vary significantly from those in the benchmark indexes listed above and performance calculation methods may not be entirely comparable. Accordingly, comparing results shown to those of such indexes may be of limited use.
The information contained herein should be considered to be current only as of the date indicated, and we do not undertake any obligation to update the information contained herein in light of later circumstances or events. This publication may contain forward looking statements and projections that are based on the current beliefs and assumptions of Chilton Capital Management and on information currently available that we believe to be reasonable, however, such statements necessarily involve risks, uncertainties and assumptions, and prospective investors may not put undue reliance on any of these statements. This communication is provided for informational purposes only and does not constitute an offer or a solicitation to buy, hold, or sell an interest in any Chilton investment or any other security.
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