The Market Commentary blog on reit.com presents analysis of the macro- and micro-economic fundamentals impacting the REIT and commercial real estate industry. The Nareit economics team offers their commentary on the state of the market, the outlook for commercial real estate and breaking macroeconomic news. The opinions set forth here are solely those of its author(s), and do not necessarily reflect the views of the Nareit or its membership.
Comparing Average REIT Returns and Stocks Over Long Periods
If you’re a day-trader, average returns during long historical periods are irrelevant. For those with long horizons, exchange-traded Equity REITs have proven themselves over and over again.
Historical Outperformance by Equity REITs Extends to Almost Every Property Type
As an asset class, stock exchange-traded equity real estate has provided higher returns than other public equity investments over most significant historical periods. The outperformance by exchange-traded Equity REITs for long holding periods has not been limited to just a small set of property types.
Volatilities and Correlations, Somewhat Elevated in February, Subsided in March
Both volatilities and correlations have come down and are now firmly within their long-term normal ranges. Estimated REIT volatilities were above 21.9% only from January 21st through February 19th, and was most recently estimated at 11.8% using data through April 15th.
Economic Fundamentals and REITs: State Unemployment Rates Show Broad Labor Market Stability, but Rising Concerns in Oil Producing States
The April release of state unemployment rates from the Bureau of Labor Statistics provides additional evidence that, in most of the country, labor markets are healthy and continue to strengthen. An exception to this improving trend is in oil producing states, where unemployment rates have been rising.
Property Values Recover Strongly In March, Up 3.3% During First Quarter
Property values nationwide increased 5.6 percent in March as measured by the FTSE NAREIT PureProperty Index Series. The strong recovery in March more than made up for a weak January and tepid February, sending property values up by 3.3 percent during the first quarter of 2016.
Economic Fundamentals and REITs: JOLTS Data Show Continued Labor Market Strength
The January release of the Job Openings and Labor Turnover Survey from the Bureau of Labor Statistics last week provides additional evidence that the labor market continues to tighten despite concerns about financial market volatility and weak foreign economic growth.
Commercial Mortgage Outlook: Flooding or Drought Ahead?
Commercial mortgages are to the real estate market like rainfall is to a farmer. Too little rain and the crops dry up, but too much and floods can destroy the fields. In commercial real estate, too little credit and business is stifled, but too much debt can lead to speculation, overbuilding and defaults.
New Data On REITs Show Stable Price Multiples And Record Occupancy Rates, But Slowing Acquisitions
REITs Deliver Solid Operating Results in 2015:Q4
REITs delivered solid gains in operating results in 2015:Q4. Funds From Operations (FFO) of All Listed U.S. Equity REITs rose nearly 10% from a year ago, to $12.2 billion, and Net Operating Income (NOI) increased 13.2% over this period. Dividends paid by All Listed U.S. Equity REITs and Mortgage REITs increased 5.1% over 2014:Q4. Total dividends paid for the year as a whole increased to nearly $45 billion.
Property Values Gained Slightly in February
Investment real estate values grew by +0.44% percent during February 2016 according to the FTSE NAREIT PureProperty® Index Series, which provides the earliest measurement of changes in the market values of properties held for investment purposes.
Strong Demand for Commercial Real Estate Carries Into 2016
Strong and growing demand for commercial real estate in 2015 carried into the new year. Commercial property transactions totaled $139 billion in January, up 15.3% over January 2015. Indeed, the CRE market appears to have gained momentum recently, as total sales over the past three months were 22.2% above the prior three months.
Early Warning Signs of Recession? Recent Reports and the Outlook for REITs
The outlook for REITs and commercial real estate depends critically on sustained improvements in economic fundamentals. What are the risks that a recession is on the horizon?