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Specialty REITs' NOI Outpaced Traditional REITs Last Year

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Traditional sector REITs are being outpaced by the newest series of specialty REITs.

Specialty REITs, which include privately held prisons,  farmland, charter schools and casinos, enjoyed soaring net operating incomes that averaged 16% last year, while major property sector REITs grew by 3%, Commercial Property Executive reports. Data centers outperformed the rest, growing 27% over the period, while self-storage, infrastructure and healthcare all advanced at least 12%.

The top four specialty sectors generated more than 60% of NOI growth in 2016 despite contributing only 30% of total equity REIT NOI. Experts said specialty REITs are beating traditional REITs because the latter are starting to see rent growth slow. As cycles mature in the main property sectors, they have less room to grow.