XLRE - REITs decline as rate hike concerns weigh on sentiments
2023-08-19 12:00:12 ET
REITs declined in the week ended Aug. 18 as rate hike concerns weighed on sentiments.
All voting members of the Federal Open Market Committee voted to raise the policy rate by 25 basis points at the July 25-26 meeting, according to the minutes of the FOMC's July 25-26 meeting. This makes it clear that most policymakers are open to more rate hikes, as most committee members continue to see significant upside risks to inflation.
FTSE Nareit All Equity REITs was down by 3.48% on a weekly basis, while Dow Jones Equity All REIT Total Return Index fell by 3.40%.
Comparatively, S&P 500 declined by merely 2.11%.
The broader real estate index decreased by 3.21% and mortgage REITs index by 5.02%.
Office REITs were the biggest losers, having declined by 6.04% from last week. Leasing continues to be challenging for office REITs, as recession fears and capital preservation put leasing decisions on hold, according to a recent report by Evercore ISI.
The sector is expected to continue to face headwinds through 2023 and into H1'24, the report said.
The agency downgraded Evercore ISI also downgraded JBG SMITH Properties ( JBGS ) to Underperform from In Line on Wednesday, citing other office REITs offer better value.
Infrastructure and Diversified subsectors followed.
Meanwhile, hotel REITs were outliers. The Lodging/Resorts index fell by a mere 1.75% W/W.
Here is a look at the subsector performance:
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REITs decline as rate hike concerns weigh on sentiments