The Market Commentary blog on reit.com presents analysis of the macro- and micro-economic fundamentals impacting the REIT and commercial real estate industry. The Nareit economics team offers their commentary on the state of the market, the outlook for commercial real estate and breaking macroeconomic news. The opinions set forth here are solely those of its author(s), and do not necessarily reflect the views of the Nareit or its membership.
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Property Values Gained Slightly in February
Investment real estate values grew by +0.44% percent during February 2016 according to the FTSE NAREIT PureProperty® Index Series, which provides the earliest measurement of changes in the market values of properties held for investment purposes.
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Strong Demand for Commercial Real Estate Carries Into 2016
Strong and growing demand for commercial real estate in 2015 carried into the new year. Commercial property transactions totaled $139 billion in January, up 15.3% over January 2015. Indeed, the CRE market appears to have gained momentum recently, as total sales over the past three months were 22.2% above the prior three months.
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Early Warning Signs of Recession? Recent Reports and the Outlook for REITs
The outlook for REITs and commercial real estate depends critically on sustained improvements in economic fundamentals. What are the risks that a recession is on the horizon?
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What Accounts for REITs’ Relative Performance vs S&P 500 During the Recent Stock Market Turbulence?
The total return on listed Equity REITs since stock market volatility spiked higher last August is 500 bps higher than the total return on the S&P 500. Moreover, REITs performed better than seven of the 10 headline Sectors according to the S&P/MSCI Global Industry Classification System (GICS®)
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Commercial Property Update 2015:Q4
Economic fundamentals for REITs and real estate continue to improve. GDP growth slowed in late 2015, but mainly reflecting a decline in energy exploration and in export markets; domestic sectors supporting real estate remain firm.
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Does the GDP Slowdown in Q4 Reveal Cracks in the Foundation for REITs?
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Has Volatility Reared its Ugly Head Again? No, Not Really
I’m sure you’ve seen the headlines about market volatility, including “No Calm in Sight as Volatility Surges from Stocks to Bonds” (Bloomberg, 1/18/16), “What To Do with the Market’s Volatility” (Fox Business, 1/19/16), and “Why The Stock Market Is Volatile, Why Volatility Hurts, And What To Do About It” (Forbes, 1/16/16). Just how bad is it? Look behind the headlines and you’ll find that volatility has really not been that bad, especially for REIT investors.
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Latest Asset Class Correlations, Volatilities, and Beta: Up from Abnormally Low Levels, But Still Low
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REITs in a Rising Interest Rate Environment: Gauging the Impact on Operating Performance
The outlook for equity REITs’ operating performance in 2016 depends in many ways on the impact of rising interest rates. How much will higher interest payments affect earnings? How solid are REIT balance sheet positions? Will higher short-term rates cause any difficulties covering interest payments?
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Did You Have the Impression that 2015 Was a Bad Year for REITs? Guess Again.
Anybody could be forgiven for having the impression that 2015 was a bad year for REIT investors. It was full of headlines about the impending increase in interest rates, and equally full of speculation that the Fed’s action would spell trouble for real estate. But REITs—especially the market-dominating equity REITs—outperformed during 2015. Does that surprise you? It shouldn’t:
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Economic Fundamentals and REITS: Reading the November Jobs Report
Total nonfarm employment rose 211,000 in November, following an upward-revised increase of 298,000 in October, showing a strengthening economy heading towards the end of the year. Labor market slack is much diminished from two or three years ago, with the unemployment rate unchanged at 5%.
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Black Friday, Cyber Monday and Retail REITs
The holiday shopping season is officially underway, with Black Friday for in-store sales and Cyber Monday for online purchases. Sales during the holiday season are a critical factor in the outlook for the retail property sector. There are crosswinds in the outlook for retail properties, however, with continued but uneven macroeconomic growth, the near certainty of a rise in short-term interest rates and, especially, the growing share of e-commerce at the expense of bricks & mortar sales.