The hard times continue for REITs in 2024 as a key index continued to flash red in the second quarter.
According to a report from S&P Global, US REIT share prices continued their downward arc during Q2 of 2024, trailing the broader market.
It pointed to the Dow Jones Equity All REIT Index, which turned in a total return of -0.9 percent for the period, in contrast to +4.3 percent for the S&P 500. On an annual basis, the REIT benchmark saw a +5.7 percent total return, still behind the broad equity index with +24.6 percent over the same timeframe.
Slicing the space more thinly by sector reveals winners and losers in REITs, S&P Global said, as the industrial REIT index saw the steepest decline with a -10 percent return for Q2. The largest industrial REIT by market cap, Prologis Inc., was among the worst performers with -13 percent as tenants’ increasing focus on cost control amid high interest rates and stubborn inflation led to a slowdown in leasing activity and net absorption.
“Demand for industrial space increased substantially during the COVID-19 pandemic, as tenants rushed to acquire more space amid a soaring online shopping and e-commerce sale environment,” noted Chris Hudgins, research analyst at S&P Global Market Intelligence. “Demand for industrial space has since cooled off, with some tenants leasing more space during the pandemic than was needed for the long term.”
Hotels had the second-poorest showing for the second quarter as the Dow Jones US Real Estate Hotels Index reflected a -6.6 percent return, followed by offices, as shown by the office REIT index’s -4.4 percent return.
“On the other hand, both the apartment REIT and healthcare REIT indexes generated strong returns during the second quarter, at 11.8% and 11.5%, respectively,” Hudgins said.
Residential REITs turned in a solid performance as the residential REIT index posted a respectable 7.6 percent return.
Self-storage REITs also got an honorable mention as the Dow Jones US Real Estate Self Storage Index returned +4.7 percent during the second quarter, edging out the S&P 500.
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