Issues Affecting All REITs
A condition where there is an excessive amount of real estate space offered to prospective tenants is often referred to as a “renters' market”—supply and demand are not in balance. In such a market, tenants are in the driver's seat and can negotiate very favorable rental rates and lease terms with property owners. An excess supply of space can be a result of more new construction than can be readily absorbed or a major fall-off in demand for space, perhaps due to a recession; but as the old saying goes, it doesn't matter whether you get killed by the ax or by the handle. Either way, weak space markets, at least in the short term, mean difficulties for property owners.
TIP All REITs are subject to three principal risks: ...
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