Market Commentary

With softening fundamentals, a lingering public-private valuation problem, and muted property transaction activity, the U.S. commercial real estate market appears to be stuck in a period of stagnation.

In today’s economy, the pace of inflation has moderated, economic growth has remained healthy, the unemployment rate has held steady, the prospects of recession have lessened, and expectations for continued monetary policy easing have proliferated.

The FTSE Nareit All Equity REITs Index fell 3.6% in October, underperforming the broader stock market as the Dow Jones U.S. Total Stock Market and Russell 1000 declined 0.7%.

Norges Bank Investment Management’s real estate investment strategy combines 50% REITs and 50% private real estate investments to enhance diversification, access new and emerging property sectors, and optimize cost management.

An Australian superannuation fund identified critical gaps in both property types and geographies within its commercial real estate portfolio.

U.S. REITs raised $23.3 billion from secondary debt and equity offerings in the third quarter of 2024; $15.4 billion came from debt, $5.1 billion was raised in one IPO, and $2.8 billion came from secondary common and preferred equity offerings.

The FTSE Nareit All Equity REITs Index rose 3.2% in September, continuing to outperform the broader stock market as the Dow Jones U.S. Total Stock Market and Russell 1000 each rose 2.1%.

Dividend distributions are a vital part of the REIT total return proposition. Since 1995, Nareit has worked with representatives of the Investment Company Institute (ICI) and the Securities Industry and Financial Markets Association (SIFMA) to develop procedures for corporate members that are designed to facilitate the timely reporting of the required dividend distribution information while minimizing reporting discrepancies.

REITs supported an estimated 3.5 million fulltime equivalent jobs in the U.S. in 2023, producing $278 billion in labor income.

At the end of 2023, U.S. public REITs owned an estimated 580,000 properties—up 1% from the previous year—and 15 million acres of timberland across the U.S.

The tenure of the recovery from the current divergence in public and private real estate valuations is now approaching two years.

The FTSE Nareit All Equity REITs Index continued to outperform broader markets in August, posting a total return of 5.4% as the Russell 1000 and Dow Jones U.S. Total Stock Market rose 2.4% and 2.1%, respectively.