• Wed. Nov 29th, 2023

    The Decline of Nontraded REITs: A Shifting Landscape for Real Estate Investment

    ByNuala Hafner

    Nov 21, 2023
    The Decline of Nontraded REITs: A Shifting Landscape for Real Estate Investment

    The world of real estate investment has witnessed significant transformations in recent times, as a result of mounting interest rates and a barrage of negative media attention. The domain of nontraded real estate investment trusts (REITs), in particular, has experienced a significant downturn, with sales plummeting this year in stark contrast to previous prosperous years. It is worth noting that the industry has managed to raise $9 billion through September, a considerable decline from the enormous sums of over $30 billion previously seen.

    The sudden decline in sales can be attributed to a myriad of factors, with rising interest rates serving as a pivotal catalyst for this shift. As the cost of borrowing increases, investors review their strategies and diversify their portfolios in search of better returns. Nontraded REITs, which traditionally provided a safe haven for investors seeking stable income streams, are now facing an uphill battle to retain their prominence in the ever-evolving real estate market.

    1. What are nontraded REITs?
    Nontraded REITs, also known as non-publicly traded REITs, are real estate investment trusts that are not listed on a stock exchange. They attract investors seeking to benefit from the stability of commercial real estate without the volatility of publicly traded REITs.

    2. Why have nontraded REIT sales declined?
    Nontraded REIT sales have declined due to various factors, including rising interest rates and negative media coverage. The increase in interest rates has led investors to explore alternative investment avenues with potentially higher returns.

    3. How much has the industry raised this year?
    As of September, the nontraded REIT industry has raised $9 billion, a significant decline from previous years where the industry would raise over $30 billion.

    4. Are nontraded REITs still a viable investment option?
    While the industry faces challenges, nontraded REITs can still offer attractive investment opportunities for certain investors. It is crucial for individuals to carefully evaluate their investment goals and risk tolerance before considering nontraded REITs as part of their portfolio.