U.S. real estate investment trust shares declined in 2017, after a brief post-election spike.
So far this year, the S&P U.S. REIT Index has dropped 1.3 percent, the Wall Street Journal reported. Last year, it rose 4.2 percent. The S&P 500 stock index, however, jumped 6.9 percent this year, following a 9.5 percent increase in 2016.
Higher interest rates make it more expensive for REITs to borrow, and investor concern meant REITs saw few gains in the past two years. After the election, however, REIT shares jumped because of anticipation over fewer regulations and fiscal stimulus.
But with interest rates on the rise, and fears that commercial real estate is declining, REIT shares are trending down. There are also concerns about the impact a possible “border tax” will have on sectors that are exposed to trade and the strength of the U.S. dollar, like retail and lodging REITs.
“While corporate profit growth recently turned positive again, hotel fundamentals haven’t yet seen a boost in business demand,” Lukas Hartwich, an analyst at real estate research firm Green Street Advisors [TRDataCustom], told the Journal. He said, however, demand may pick up through summer as corporate profits gain.
Data center landlords performed better than retail and industrial REITs, according to the newspaper, with investors expecting higher earnings from tenants expanding the ability to host online traffic and mobile transactions.
Trump’s plan to bring down the corporate tax rate to 15 percent may also make REITs a less attractive investment option than before.
In March, The Real Deal ranked the major shareholders of New York City’s REITs. [WSJ] — Miriam Hall