Market Commentary

Nonfarm payrolls rose 266,000 in November, well above consensus forecasts and the strongest gain since January.

Earnings growth broadened across the REIT sector in the third quarter, with 65.9% of REITs reporting higher FFO than one year ago.

The economic fundamentals for CRE markets maintained momentum in Q3, with GDP growth on trend and modest job gains.

How likely is it that the current slowing could lead to a recession? How exposed are real estate markets and REITs to deteriorating macroeconomic fundamentals?

Real estate rents and values tend to increase when prices do, due in part to the fact that many leases are tied to inflation.

Commercial property prices can be a double-edged sword. When they are rising, they can provide investors with solid capital gains above and beyond the income received from rents. But if they rise too rapidly and get ahead of fundamentals, investors risk losses from falling prices.

The JOLTS report on labor market turnover can help shed light on the outlook for the economy and for real estate.

REITs have strengthened their balance sheets over the past decade, with average leverage and interest expense to NOI falling to historical lows. Averages, however, don’t reveal what is going on in the tails and if there are hidden pockets of risks.

REITs issued $19.2 billion in secondary offerings of common equity during the first half of 2019, which is more than they raised during the entire year of 2018.

Data from CoStar and S&P Global Market Intelligence show REITs have very little exposure to WeWork.

It is important during periods of market volatility and shifting economic fundamentals for investors to recall the concerns that not long ago dominated discussions about the outlook.

An inverted yield curve has preceded past recessions, yet other indicators today carry a stronger signal of a resilient economy.