Market Commentary

Today’s property market is generally marked by supply-demand imbalances, yet not all segments of the commercial real estate market have exhibited the same levels of operational performance.

Commercial property performance and valuation metrics diverge from time to time.

The FTSE Nareit All Equity REITs Index rose 1.8% in March. Broader equity markets continued to outperform, as the Russell 1000 and Dow Jones U.S. Total Stock Market each rose 3.2%.

Nareit tracks quarterly investment holdings for the 27 largest actively managed real estate investment funds focusing on REIT investment for insight on expert investor sentiment.

This is a guest commentary written by Annie Xiao, portfolio manager at the Employee Retirement System of Texas (Texas ERS).

The FTSE Nareit All Equity REITs Index rebounded from a weak January, rising 1.9% in February. REITs underperformed broader markets as the Russell 1000 and Dow Jones U.S. Total Stock Market both rose 5.4%.

Nareit analysis of data from Preqin, a financial research firm that tracks investments in alternative assets, indicates that the use of REITs by pension plans has been increasing, particularly among the largest, most sophisticated plans.

GRESB, an independent organization providing validated sustainability performance data and peer benchmarks for investors and managers, has released its 2023 Real Estate Assessment, which measures the sustainability performance of individual real estate portfolios based on self-reported data.

Data from CoStar highlight the current state of the commercial real estate market.

Space market fundamentals can differ markedly across property types. Net absorption (demand) and net deliveries (supply) for the four traditional property types (retail, apartments, industrial, and office) highlight the ups and downs of the space markets and can illustrate excess net demand (net absorption less net deliveries) for each sector.

The FTSE EPRA Nareit Developed Extended Index fell 4.5% in January, and posted a total return of 16.0% since Oct. 19, 2023.