While tenant rent collection was a helpful metric for tracking REITs in 2020, analysts will be turning their attention to operating metrics like occupancy rates this year, according to Nareit VP of Research Nicole Funari.
Rent collections stabilized to nearly 100% of typical collections by mid-July 2020 for REIT sectors including industrial, office, health care, and apartments. Shopping centers, bolstered by grocery stores and drug stores, stabilized in the high 80% range in the fall, and regional mall rent collections are in the low 80% range heading into 2021.
“We’re seeing a little bit of slippage [in occupancy rates] for office, apartments, and industrial,” Funari said. “Health care also is a concern. Obviously for senior housing and for skilled nursing care, either due to health or economic reasons, occupancy rates have been hard to maintain.”
Funari said that trends that existed in early 2020 were reinforced by the pandemic, including the rise of REIT sectors like ecommerce, data centers, and cell towers. Other REIT sectors, like self-storage and timberlands, have been performing well, and single-family homes outperform apartments in most cases, she added.
“All of these new REIT sectors were only 5% of market cap in the REIT industry in 2000, and they’re over 40% today,” Funari said. “The diversification in the REIT industry and the changing composition is really what’s kept the resiliency through this year, and for what we expect in 2021.”