Did REITs predict the current problems that the commercial real estate market is experiencing?
They did. As REITs have become a bigger part of institutional real estate ownership in the United States, Europe, and parts of Asia, they’ve become a much more effective indicator of market direction. At the start of the market downturn, REIT prices in the United Kingdom started to fall six months ahead of private indices. In the United States, prices started to decline about 12 months ahead of the general market. In both cases, REIT share prices started to reflect the weakness in leasing and the deterioration of rent growth earlier than private market indices did. What are REITs predicting these days? The recovery of REIT share prices in the summer of 2009 reflected a firming up in property pricing. That doesn’t mean that the prices of commercial property or rents are going up, but there’s a greater clarity on pricing and a greater sense of what properties are worth. This stabilization of pricing is more apparent in REITs. You can’t say that if REITs go up today, the commercial real e
