Real estate services stocks largely ended a dismal week unscathed, as the broader markets fell for a second straight week amid mixed earnings reports, stalled stimulus talk and another Covid surge. Office and mall REITs didn’t fare so well.
The S&P 500 fell 5.59 percent to end the week, with the tech and real estate-heavy Nasdaq Composite also down, 5.39 percent. The Dow Jones Industrial Average had its worst month since March, ending Friday at 26,501.60. A strong third-quarter gross domestic product report couldn’t reverse Wednesday’s massive selloff in which the Dow dropped 943 points.
CBRE, the world’s biggest real estate services firm, ended Friday with its share price more than 8 percent higher despite reporting a near 10 percent decline in third quarter income. The company’s decision to shift its global headquarters from Los Angeles to Dallas gave the stock a short boost. CBRE said personnel would not change.
Colliers International, which this week reported an 11.5 percent jump in net income during the third quarter, closed the week 7.58 percent higher.
“Real estate is either feast or famine right now,” said Alexi Panagiotakopoulos, co-founder of Fundamental Income, sponsor of NETLease Corporate Real Estate ETF. “Office REITs face a lot of headwinds,” he added. “It’s famine for mall REITs.”
One of those is the nation’s largest mall owner, Simon Property Group, which saw its stock price fall 6.16 percent this week, to $62.81 a share. The company said it had finalized its deal with Brookfield Asset Management to buy bankrupt retailer J.C.Penney. Brookfield’s stock also fell, 12.47 percent, to end the week at $29.78.
Office REIT Boston Properties saw income decline about 17 percent in the third quarter. Executives said they don’t expect tenants to return to their offices in large numbers until late next year.
With investments mainly in New York and San Francisco office markets, Paramount Group recorded $7 million in losses for the third quarter, a slight increase from $6.3 million in the second quarter.
Homebuilder Lennar, which saw its stock price rise above pre-pandemic levels since July thanks to booming housing prices, fell 6.24 percent for the week, and 11.13 percent so far this month.
The saving grace of the economy has been the federal stimulus — though lawmakers can’t seem to agree on another round — and low interest rates, Panagiotakopoulos said. That has kept leveraged companies from falling into distress. But the threat of another large-scale surge in coronavirus cases still threatens to dampen demand. Office tenants have been slower than expected to return, with landlords shifting their expectations to 2021. In Illinois, Gov. J.B. Pritzker closed Chicago restaurants and bars to indoor dining, starting Oct. 30, because of a recent uptick in Covid cases.
“There will be more clarity in the economy after the election,” Panagiotakopoulos added.