The stock market is booming. So why are REIT shares falling?

Analysts point to rising rates, tax reform

New York /
Jan.January 24, 2018 11:00 AM

Does no one like real estate investment trusts anymore? While the overall stock market is surging, real estate investment trusts are the odd one out.

Last year, the S&P 500 stock index rose by 21.8 percent, but the FTSE NAREIT All Equity REITs index rose by a mere 8.7 percent. And over the first few weeks of 2018 REIT shares are even down 2.4 percent while the stock market overall continued to climb.

Experts point to two explanations. One is that most REITs don’t really benefit from the recently passed federal tax reform because they don’t pay income taxes. The other: investors fear rising interest rates could hurt the real estate market.

“It seems like there’s been a broad selloff of defensive-type industries like real estate into other industries that will benefit more from rising rates, tax reform and faster growth in the economy,” Matt Kopsky, an analyst at Edward Jones, told the Wall Street Journal.

Steve Sakwa, an analyst at Evercore ISI, predicted that property prices could fall amid rising rates. “If the cost of money goes up [buyers] generally have to pay a little less for the asset,” he said.

REIT earnings season starts this week, and strong profits could give share prices a boost. On Tuesday, industrial REIT Prologis said that its profits in the first quarter were $373 million, up from $345 million a year earlier. [WSJ]Konrad Putzier 


Related Articles

arrow_forward_ios
With a cooling trade war, stocks perform well, including real estate. (Credit: iStock)

Real estate stocks push up this week as U.S.-China trade tensions ease

Real estate stocks push up this week as U.S.-China trade tensions ease
416 West 25th Street and Maverick Real Estate Partners principal David Aviram (Credit: Google Maps and LinkedIn)

Chelsea landlord claims “predatory” lender is charging a crippling interest rate as punishment after losing foreclosure case

Chelsea landlord claims “predatory” lender is charging a crippling interest rate as punishment after losing foreclosure case
One Madison Avenue and Marc Holliday (Photos via SL Green)

SL Green snags $1.25B construction loan for One Madison Avenue

SL Green snags $1.25B construction loan for One Madison Avenue
Steven Mnuchin (Getty)

Trump plan would let real estate firms avoid SALT deduction cap

Trump plan would let real estate firms avoid SALT deduction cap
11 Penn Plaza and 120 Wall Street (VNO, Wikipedia Commons)

Manhattan’s top real estate loans post second best month since March

Manhattan’s top real estate loans post second best month since March
Square Mile Capital CEO Craig Solomon and The Real Deal's Hiten Samtani

WATCH: “It’s going to take longer, and it’s going to cost more”: Craig Solomon on the real estate capital stack

WATCH: “It’s going to take longer, and it’s going to cost more”: Craig Solomon on the real estate capital stack
OneTitle's Seth Brown (iStock)

OneTitle set out to change the title industry. Now it’s out of business

OneTitle set out to change the title industry. Now it’s out of business
The Scribner Building at at 597 Fifth Avenue and Joe Sitt of Thor Equities (Wikipedia Commons)

Thor delinquent on $105M loan at 597 Fifth

Thor delinquent on $105M loan at 597 Fifth
arrow_forward_ios

The Deal's newsletters give you the latest scoops, fresh headlines, marketing data, and things to know within the industry.

Loading...