REIT Market Dips in October

The U.S. REIT market's string of monthly gains came to an end in October, as the FTSE/NAREIT All-REIT Index dropped 4.8 percent for the month.
The Index's performance fell in line with the broader market measures for the month, as the S&P 500, Russell 2000 and NASDAQ Composite all saw declines ranging from roughly 2 percent to 7 percent. As of November 3, the Index had gained 14.14 percent in 2009.
Sheila McGrath, an analyst with Keefe, Bruyette and Woods, noted that capital flows into dedicated REIT mutual funds had turned negative by the end of October, which she said indicated some possible tax-loss selling. McGrath also pointed out that with the start of earnings season, certain sectors and markets were reporting weaker than expected results.
The tightening of spreads in the unsecured debt market and the success of their equity issuances portend well for REITs in the near future, according to McGrath. "REITs are much more well-positioned than they were earlier in 2009," she said.
McGrath said REIT stock prices could edge higher by the end of the year. She also said she expects some initial public offerings of REITs to come to market in the coming months.
"The pendulum has swung from private players having the capital markets advantage a few years ago back to public players. Those with access to the public equity and debt markets are poised to benefit in our view as an acquisition story ultimately emerges," McGrath said.
On the international front, the FTSE EPRA/NAREIT Global Real Estate Index fell slightly for the month, down 1.38 percent in October. As of November 3, however, the Global Index was up 32.41 percent in 2009.