KBWY - State Of REIT Nation: Not Out Of The Woods Yet
2024-03-27 11:00:00 ET
Summary
- Two years of persistent rate-driven pressure on commercial and residential real estate markets appeared to be easing in early 2024, but firming inflation has again muddied the outlook.
- Expectations of "Higher for Longer" have merely shifted to "High for Long." Many private equity funds and some highly-levered REITs were ill-prepared for a period of sustained 4-5%+ benchmark rates.
- Private markets are finally feeling the pain that beset public REIT investors since 2021. Commercial property values have now declined over 20% nationally, and nearly 40% in some troubled segments.
- Outside of the office sector, the pockets of distress remain entirely debt-driven as property-level fundamentals remain buoyant, but the refinancing clock is still ticking towards zero for many "zero rate heroes."
- Macroeconomic conditions are evolving in an ideal manner for public REITs to finally exploit their competitive advantage - access to nimble equity capital and long-term fixed-rate debt - which was of little advantage in the "lower forever" environment.
State of the REIT Nation
In our State of the REIT Nation , we analyze the recently released NAREIT T-Tracker data. Earlier this month, we published our REIT Earnings Recap which analyzed Q4 results on a company-by-company level, but this report will focus on higher-level macro themes affecting the REIT sector at large....
State Of REIT Nation: Not Out Of The Woods, Yet