Commercial R.E. nuttiness

I spend most of my time focused on residential real estate. But that doesn't mean I don't pay attention to what's going on in the commercial side of the business, and in particular, what the commercial REITs are doing.

Maybe I'm just crazy, but it sure looks like things are getting nutty there. I mean, some of these REIT shares are trading at P/E ratios we haven't seen in years and years. And their dividend yields? Far lower than risk free Treasuries -- like more than 100 basis points lower. In fact, some REITs are sporting their lowest indicated dividend yields ever.

Why would an income seeking investor (traditionally the kind of buyer attracted to REIT shares) take on the extra risk of owning a REIT stock instead of a Treasury Note? If the economy slows, won't demand cool for office, retail, and industrial space? And won't that cause rent growth to slow?

Anyway, I have some more thoughts posted in my weekly Money and Markets column, available here, if you're interested. Have a good weekend ...