U.S. real estate stocks fell in November, underperforming the broader market, with a drop of 1.5 percent, according to the FTSE Nareit All Equity REITs Index. By comparison, the S&P 500 Index recorded a 3.4 percent gain in November. Over the first 11 months of 2019, U.S. REITs rose 27.9 percent, according to the index.
Hotel property fundamentals showed strength coming out of the third quarter, and lodging/resort REITs had one of the best performances in November, rising 2.6 percent. Year-to-date, the sector had a total return of 9.9 percent. The hotel sector remains healthy, but growth is forecast to slow over the next couple years, according to CBRE Research.
Among the biggest drops in November was a 6.1 percent fall by healthcare REITs and a 4.6 percent decline among self-storage REITs. The self-storage sector continues to be plagued by high supply levels, weakening fundamentals for the sector, according to Yardi Matrix. Year-to-date, self-storage REITs have risen 12.0 percent.
Among the core property types, industrial REITs rose 2.3 percent and office REITs advanced 1.2 percent in November, while retail REITs fell 1.1 percent and residential REITs dropped 1.8 percent.
Retail REITs’ struggle reflects secular changes to the retail sector. Among the retail subsectors, regional mall REITs rose 1.3 percent in November, while shopping center REITs fell 1.2 percent and freestanding retail REITs dropped nearly 3.5 percent. However, regional malls are the only REIT sector to have a negative total return through the first 11 months of the year. Year-to-date, regional mall REITs have fallen 7.5 percent.
Residential REITs’ investment performance was dragged down by the apartment sector, which dropped nearly 3.0 percent in November even though multifamily property fundamentals remained strong entering the fourth quarter, according to Yardi Matrix. Manufactured housing REITs, which have the highest year-to-date total return among property subsectors with an increase of 59.4 percent over the first 11 months of 2019, continued their rise with a gain of 3.4 percent in November.
