Evan Serton, Senior Portfolio Specialist at Cohen & Steers, joined Keith Black, Managing Director of RIA Channel, to discuss the benefits of active management in the listed REIT market.
The listed real estate marketplace offers a diverse range of property types with varying returns. An active real estate portfolio manager seeks to invest in property types with strong returns and demand trends, while underweighting properties where performance is likely to be challenged. Listed real estate products have proliferated in recent years, with a growing weight on technology-linked properties such as cell towers and data centers.
In 2025, Serton expects the economy to decelerate, which can often be a sign for listed real estate to perform well. Despite this economic deceleration, many property types have healthy fundamentals, especially those linked to the strong capital expenditures in the technology sector. Cloud computing, data storage, and artificial intelligence are likely to drive data center demand toward higher rents for quite some time. Demographic trends favor senior housing and senior family rentals. Serton has a more cautious outlook on traditional property types such as office and industrial.
Serton notes that the listed REIT market serves as a barometer of where private real estate funds are likely to be in the future. The performance of listed REITs is on the leading edge, where declines occur earlier, such as in 2022, but recoveries also start earlier. A portfolio that combines public and private real estate holdings can enhance returns and mitigate risks. Listed real estate tends to have a mean reversion effect, where today’s low valuations relative to the broader equity market may predict strong future performance. Specifically, cell tower REITs are trading at lower levels than their historical valuations, which declined as interest rates increased.
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