Where REITs gather

Investors in equity real estate, via either the public or the private markets, must be knowledgeable about both the concentration of REIT investments and the flow of REIT capital. Since 1993, a massive wave of real estate investments have been converted from private to public ownership. The apartment sector has seen the greatest percentage of property converted to public ownership, growing from a 3.3% share at the end of 1993 to 11.1% by the end of 1997. The office sector is the most volatile in terms of total returns and values. The retail sector is 2nd only to apartments in terms of the number of cities with greater than 10% REIT ownership. In the warehouse sector, in which there are relatively fewer REITs, the markets that make the list generally fall into 2 categories: major national distribution hubs where the REITs have a huge development capability; and smaller subregional hubs where the REITs can dominate the market. Investors should concentrate acquisitions on those markets where supply relative to demand is in check and the REITs are underweighted, and focus disposition in those markets where demand is strong and the REITs are increasing their exposures.