It's the perfect market for REITs. Occupancy rates are are high, interest rates are low and current property owners want to cash out.

That confluence of forces has set the market for acquisitions on fire over the past year, all of which continued on Thursday. The big story was that Dundee REIT (D.UN-T32.69----%) got its hands on Blackstone's Canadian portfolio, but Allied Properties (AP.UN-T23.980.050.21%) also announced $180-million in acquisitions and TransGlobe Apartment REIT (TGA.UN-T11.35-0.01-0.09%) purchased $740-million worth of properties from TransGlobe Investment Management Ltd. To finance these deals, Allied and TransGlobe tapped investors for more cash, raising $315-million collectively. The ease with which the REITs can do this is what allows them to keep buying. Without income trusts, retail investors are more than happy to keep throwing money at high-yielding REITs. And with so much demand for REITs, their unit prices have skyrocketed, which means the REITs' cost of capital keeps falling.

To understand just how much buying has taken place, Dundee alone has purchased $1.6-billion worth of properties this year. It's only July. This sum comes on top of the almost $900-million worth of properties purchased last year.
Overall, the REITs are happy to keep buying because occupancy rates are so high. TransGlobe's overall occupancy rate was a whopping 96 per cent at the end of June. But with so many of them out there acquiring properties, it's worth wondering if there's a bubble forming. Could everyone be buying just to keep pace with their peers, which in turn promotes more buying?
Asked yesterday if they crunch the numbers on every single deal, Bruce Traversy at Dundee REIT noted that they comb through the numbers very meticulously and that they always keep their distribution to unitholders in the front of their minds.
For the moment, the numbers make sense. Let's just hope the market stays hot and occupancy rates stay high, because if rents start to fall, there are a lot of new shares out there in the market and they require a lot of distributions to be paid.