VPN - REIT returns outweigh returns from major indices this week trend expected to continue through 2023
2023-04-22 12:00:00 ET
REIT returns outweighed returns from other major indices this week, and the sector is expected to outperform private real estate and broader equities in 2023.
U.S. stocks could not impress this weak as earnings from major names failed to spark momentum and worries over a cooling U.S. economy weighed on sentiment.
The S&P 500 index rose by a mere 0.22% from last week.
Comparatively, the FTSE Nareit All Equity REITs index increased by 1.58% on a weekly basis, and the broader real estate index by 1.67%.
Historically, REITs have underperformed private real estate in the four quarters before a recession, and outperformed private real estate during and for the four quarters after a recession, according to a report by CenterSquare Investment Management.
REITs offer investor portfolios exposure to cash flows generated through long-term leases, which can withstand the impact of short-term volatility in economic conditions. Also, the cash flows do not tend to vary on a yearly basis, even during recessionary times, as typically seen among equities, the report noted.
Amid a looming recession, most asset classes will suffer in 2023. But REITs will lead the way toward recovery, according to the report.
Key quality REIT characteristics are; resilient pricing in face of a recession; multi-year earnings visibility based on secular growth drivers; strong, flexible balance sheets; visible and above-average distribution growth; and highest prospect for global inflows resulting in relatively steadier asset values and steadier cap rates despite higher rates, Bank of America Securities analyst Jeffrey Spector had said in his REIT investing strategy for 2023.
Industrial, manufactured housing, self-storage and senior housing subsectors will demonstrate the most resilient pricing power in 2023, based on multi-year secular growth drivers and offer the best earnings visibility and distribution growth, according to Spector.
For the week ending April 21, data centers subsector increased the most with 4.72% growth on a weekly basis, followed by industrial with 3.53%.
Office subsector was a surprise winner this week, gaining 3.00% W/W.
Here is a look at the subsector performance:
More on REITs:
For further details see:
REIT returns outweigh returns from major indices this week, trend expected to continue through 2023