After a second quarter rebound, market returns for the domestic and global REIT industry were modestly positive in the third quarter except for the composite emerging country index. Property sectors were a mixed bag, with timberland and self-storage posting returns of 22.1% and 16.9% in the third quarter while returns for office, retail, residential, infrastructure, and lodging/resorts were negative for the quarter. The remaining sectors had small positive returns in the third quarter, but overall property sectors were negative year-to-date except for data centers (22.6%), self-storage (11.0%), industrial (8.5%), and infrastructure (7.3%).
Third quarter operating performance as measured by annual growth in FFO was negative for the industry at -22.3%, and for all property sectors, The largest declines were in lodging/resorts (-178.3%), infrastructure (-42.2%), and retail (-28.9%). However, REITs strengthened their balance sheets in the third quarter lowering leverage from 52.0% of book assets in second quarter 2020 to 50.8%. REITs also increased their weighted average term to maturity on debt from 82.5 months in the second quarter to 84.9 months. Macroeconomic indicators show an improvement with an increase in annualized GDP for the first time in 2020 and payroll employment growth up almost 4 million jobs. Download the 2020 Q3 data.
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1Source: FactSet, FTSE Nareit US, FTSE EPRA/Nareit Global
2Source: Nareit T-Tracker®, except where noted. Operational Performance is dollar weighted from the FTSE Nareit All Equity REITs index.
3Gross acquisitions less dispositions over the prior 4 quarters as a portion of undepreciated book value of total property holdings, reported in basis points
4Source: Green Street Advisors All REIT Premium to NAV
5Source: Bureau of Economic Analysis GDP report and Bureau of Labor Statistics Employment and CPI reports