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Pisani: Is Commercial Real Estate Back?

Is commercial real estate back? Real Estate Investment Trusts (REITs) and big banks lead the upside today. Strong volume in real estate ETFS today, like the ProShares Ultra Real Estate, as well as the ProShares UltraShort Real Estate ETF.

I have noted today that many REITs continue to hit new highs today.

Why are REITs rallying? Several reasons:

1) a continuing search for yield, which REITs provide; many have dividends in the 3 to 5 percent range;

2) prices are starting to go up because demand for real estate is increasing;

3) there is not a lot of product for sale. This may seem amazing, but it's true: there is not a lot of pressure to dispose of non-performing properties, so many big holders are simply holding off selling, betting that prices will improve;

4) Rents are starting to go back up, concessions are going back down.

What about all the debt that many REITs have? It hasn't gone away, but banks have realized that forcing them to dump real estate on the market at pennies on the dollar is not a smart strategy...General Growth had some $11 billion in debt that was extended.

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