XLRE - REITs fall as pause on debt-ceiling talks weigh on market sentiments

2023-05-20 12:00:00 ET

REITs ended the week lower as a pause on the debt-ceiling talks weighed on market sentiments surrounding the sector.

The FTSE Nareit All Equity REITs index fell by 2.35% on a weekly basis, while S&P 500 gained by 1.65%.

The broader real estate index decreased by 2.37%, while the mortgage REITs index rose by 2.45%.

All three major U.S. stock indices fell to session lows on Friday after the news that the talks on raising the federal government's $31.4T debt ceiling hit a roadblock.

Debt default would hurt REITs with government exposure, Morgan Stanley's head of U.S. REITs, Ron Kamdem, said in an interview to CNBC.

Less than 10% REITs in the sector have government exposure. Some office REITs have government agencies as tenants and some healthcare REITs have exposure to skilled nursing facilities that rely on Medicare and Medicaid payments for reimbursement, Kamden noted.

If a compromise is reached, the REIT sectors can somewhat flourish, according to the interview.

Infrastructure REITs were the biggest laggards, having decreased by 3.74% from last week. Healthcare and self storage REITs followed.

Meanwhile, hotel REITs were outliers, having gained 0.41% in value. Here is a look at the subsector performance:

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