To read this full article you need to be subscribed to Institutional Real Estate Americas
REITs, interest rates and fairy tales: Don’t fear the big bad interest rate wolf
It is happening again. After each of the Federal Reserve’s interest rate hikes (due to its inflation precaution, or is that paranoia?), REIT shares drop for two or three days, despite numerous earnings reports that show REITs beating Wall Street’s expectations.
Why the stock decline, then? Simply, the “Chicken Little” expert commentators — who cluck about how the sky is falling on interest rate–sensitive stocks — create a panic among investors. Thus, when the interest rate “wolf” (read, the Fed) comes growling, fearful investors sell their REIT shares, like the three little pigs who run from their homes (or commercial property in this case).
Fairy tales don’t correlate with reality
Those experts and investors ought to read the data before they cluck any more. Let’s get this right once and for all: REITs are not interest rate–sensitive stocks. The correlation between REITs and interest rates is not like that of bonds, whi