On July 16, 2007, we sounded the alarm on commercial real estate stocks… aka REITs. We cited record low yields and high valuations as reasons for avoiding – or even shorting – the sector. It didn’t take long for the market to prove us right.

After that column, REITs in general fell 25% in six months. Shares of America’s largest REIT fund manager, Cohen & Steers, were cleaved in half during the drop. After all, if folks don’t want to own REITs, they don’t want to own the guys who own REITs either.

As today’s chart shows, investors are warming back up to the sector. C&S has built a solid “floor” in the $25 area and sits at a six-month high. Rallies come on strong volume, corrections come on weak volume. CB Richard Ellis, the world’s largest real estate services company, sports a similar chart.

We can’t know what the future holds for U.S. commercial real estate. Times could get worse. Times could get better… The renewed strength in Cohen & Steers tells us the forward-looking stock market likes the “times are getting better” thesis.