Calvin Schnure

REIT earnings slowed a bit in late 2018, according to the Nareit T-Tracker®, which showed funds from operations (FFO) of all listed equity REITs of $15.9 billion.

The outlook for REITs and commercial real estate remains favorable, despite some mixed macroeconomic news in the early months of this year.

One of the most critical issues for real estate investors in the year ahead is the outlook for cap rates and property prices, especially with Federal Reserve policy in the spotlights. In addition to the future path for their target for short-term interest rates, Fed officials have also been discussing policy options concerning their securities holdings.

REITs have delivered a long-term total return to investors that generally matches and often beats broad market aggregates.

January was the strongest monthly performance for REITs since October 2011.

Commercial real estate markets maintained momentum through the end of 2018, as net absorption continued at a high level across major property types.

In terms of information about the economy, the retail sales report for December and business inventories report for November were early casualties, as these releases planned for Jan 16^th were delayed due to the Census Bureau being shuttered by the lack of funding.

The government appears to be settling in for an extended partial shutdown, at least as of January 2. If the shutdown persists beyond the next few days, however, the closure of several key agencies that produce statistics on the U.S. economy could begin to have an impact on financial markets, including REITs.

REIT leverage ratios declined on both a book-value and market-value basis in the third quarter, as prudent balance sheet management reduced the sector’s exposure to interest rates.

Two of the oldest rules on Wall Street are “Buy low, sell high,” and “Don’t fight the Fed.” While it can be difficult if not impossible to pick the highs and lows in the stock market, it is not that hard to read the Fed’s signals about future policy.

Funds from operations of all listed equity REITs was 11.1 percent higher than one year earlier, according to the Nareit T-Tracker®.

REITs have relied increasingly on a low-cost, flexible way of raising equity capital as they have expanded their issuance through At-the-market (ATM) programs.