Market Commentary

The pandemic had a significant impact on demand for commercial real estate in the third quarter, resulting in rising vacancy rates and slowing or falling rents and property prices. The impact was uneven across property types, however, with greater effects on office and retail property markets, but smaller or little impact on multifamily and industrial properties.

While REITs have underperformed the broader stock market so far in 2020, it is long-term returns that matter.  REITs have been a favorable choice when looking at long-term returns.

REITs posted declines comparable to those on broad market indices.

The travel industry has been severely impacted by the pandemic, including the lodging/resort REIT sector, but measures to reduce risks of infection have allowed hotels to continue reopening, and occupancy has begun to rise in recent months.

Roughly 44% of American households are invested in REIT stocks.

Across the various REIT sectors, there were seven property sectors with gains for the week, led by lodging/resorts with a total return of 7.6%.

Demand for apartments looks to be robust post-pandemic, however, as there is one feature of housing that makes it different from retail, office, or hotels: one cannot live and sleep online.

Last week’s decline breaks a string of gains the to prior weeks, but REITs are still up 2.1% month-to-date.

E-commerce surged in the spring, but stores are reopening and curbside pickup is a popular hybrid of online shopping and bricks-and-mortar delivery. Many shoppers enjoy the retail experience and still prefer to check the size, fit, and appearance at a bricks & mortar store.

REITs outperformed most other GICs sectors with only 5.8% of the REIT market cap downgraded. REITs were the third best performing GICS sector by this measure.

This was the second week of rising share prices, after four straight weeks edging lower through September.