Real Estate Stocks Take A Hit, Some Prove More Resilient

As equity markets took a pummeling last week, major publicly traded property owners and brokerages experienced similar suffering, deepening losses that have piled up as the year wears on.

Not all losses in the latest drop-off are created equally, though, with some companies faring better than others and those with atypical and diversified property types handling the economic strife better than their more conventional counterparts. 

Driven by a fresh interest rate hike, stubbornly high inflation and an economy that many agree is grinding steadily toward recession, the three major indexes fell last week, marking the fifth down week out of the last six. The NYSE Composite index ended Sept. 23 down nearly 20% year-to-date, and the Dow Jones Industrial Average fell below 30,000 for the first time since June. 

Overall, real estate stocks took it on the chin Friday, with the FTSE Nareit All Equity REITs index losing 1.24% on Friday, down more than 25.5% for the year. The FTSE Nareit Real Estate 50 index, which tracks the performance of the large-cap real estate sector of the U.S. equity market, hasn't done quite as poorly, but it still was slammed, down nearly 1% for the day on Friday and nearly 18% for the year. 

Even REITs that focus on property types that are performing well in today’s economic climate, like industrial and multifamily, are struggling.

Clipper Realty, whose multifamily portfolio is in Manhattan and Brooklyn, was down 1.3% for the year as of Friday, while other residential REITs, such as Invitation Homes, Independence Realty Trust, Equity Residential and American Homes 4 Rent, all are down, some by double digits. Equity has lost about 12.8% in stock value since a year ago.

Industrial REITs haven't fared much better, despite the surge in demand for the property type, which has slowed recently. Industrial Logistics Properties Trust lost over 70% of its value since last year (and more than 3.5% on Friday), and industrial giant Prologis is down about 14.6% for the year.

Other industrial REITs with sliding stock prices include First Industrial Trust, Plymouth Industrial REIT and even cold storage specialist Americold Realty, which has felt power costs and other inflationary pressures lately, passing those costs along to customers.

More modest losers for the year, though still losers, include a long list of REITs. Big names such as Blackstone Mortgage Trust, Starwood Property Trust, Heathcare Realty Trust, Kimco Realty and AvalonBay Communities have all seen their stock values drop.

Among REIT stocks, some have suffered a serious meltdown in valuation since this time last year, when the world seemed to be emerging from the pandemic and high inflation was still a relic of the 1970s.

PREIT, a retail owner weighed down by debt, has lost more than 87% of its value over the year, though it did a dead-cat bounce of more than 5.3% on Friday — one of the few gainers for the day. Office specialist Hudson Pacific Properties and the retail REIT Macerich were both off by more than 50% compared with last year and down nearly 3% and 5.5% on Friday, respectively.

Of the 182 publicly traded REIT stocks listed by the National Association of Real Estate Investment Trusts, only 24 gained in stock value year-over-year as of Friday.

Among the exceptions posting year-over-year gains is New York-based Bluerock Residential Growth REIT, a national apartment specialist. Compared with a year ago, its stock has increased nearly 125%. In trading on Friday, Bluerock barely moved, up 0.04%.

Only one other residential REIT has gained ground for the year: BSR REIT, which owns Sun Belt communities and is up nearly 7% for the year. 

Among the winning REITs for the year are those with diversified portfolios that provide a hedge against the rough-and-tumble economy.

First REIT of New Jersey stock was up 28.5% for the year, while CTO Realty Growth and W.P. Carey were gainers as well, though not by as much.

Specialty REITs, those generally outside the major real estate property types, also turned in some winners for the year. Agriculture specialist Farmland Partners did best of all, up about 13.7%. Data center owner Iron Mountain was up, as was VICI Properties, a gaming and entertainment property owner.

Even some retail REITs did well over the year, such as net-lease specialist Agree Realty Corp., up about 6.4%. Phillips Edison, Getty Realty and Alpine Income Property Trust are other winners in the retail sector so far this year.

In the industrial realm, the only winning stock for the year is that of Duke Realty, up about 6.1% for the year, though it is a special case. Earlier this year, the company agreed to a $25.6B acquisition by Prologis.

Among non-REIT major real estate companies, especially international brokerages, stock values have generally fallen as well, both recently and since last year.

CBRE, Cushman & Wakefield, JLL, Colliers International Group and Newmark all posted losses last week, ranging from 1.7% to 4.7%, mirroring annual losses each company has suffered as well.

Major real estate investors haven't escaped the downtrend, even if real estate is only part of their holdings. Behemoth investor Blackstone was down 2.2% on Friday and has seen its stock price plummet 33.2% over the year. KKR and Carlyle Group stock have similarly dropped.

Ahead of the Monday's market open, indexes in the U.S., Europe and Asia were all set to continue their slide. All three U.S. indexes are expected to open down roughly 1.5%, while the Nikkei and Hang Seng are in slightly better shape, tending toward dips of 0.6% and 1.2%, respectively.