Below is a chart and brief excerpt from today's Early Look written by REITs analyst Rob Simone.
We are obviously long inflation in #Quad2. This will change at some point as the cycle turns, but where I need to focus are the areas in my space that will perform the best (or worst) amidst inflation.
This naturally lends itself to the shorter-lease duration REIT subsectors with the highest underlying market rent growth, where a landlord can more quickly “roll” its leases up to a higher rate and capture that inflation in revenue. Hence the focus on self-storage (monthly leases), certain residential names (~12 months), etc.
And then within subsectors, focus on individual securities that are best positioned from a duration perspective. For example, take a look at today’s "Chart of the Day" to see the Industrial REIT Lease Duration.