(The following statement was released by the rating agency)
Link to Fitch Ratings' Report: U.S. REITs: Portfolio Performance Tethered to
Macroeconomic Factors
https://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=881942
NEW YORK, June 02 (Fitch) Two pre-eminent economic factors will go a long way
towards dictating performance for U.S. REITs for the remainder of 2016,
according to Fitch Ratings in a new report.
Fitch investigated the relationship between key macro indicators like GDP and
unemployment to annual changes in same store net operating income. Among the
notable conclusions Fitch drew from its analysis were that meaningful
differences in cyclicality between REIT property types exist. 'There are
significantly greater peak-to-trough changes over the course of the business
cycle in certain sectors than others,' said Managing Director Steven Marks. 'For
example, multifamily same store net operating income growth is more volatile
than retail given the sector's one-year leases.'
Another conclusion Fitch derived was that macro indicators are strongly
correlated over time with changes in SSNOI. For instance, Fitch's SSNOI growth
estimates for office and multifamily incorporate changing supply because supply
appears to be relatively more strongly correlated to these sectors' SSNOI
growth. Additionally, lagged variations of the key metrics generally produced
the best results, though optimal lags varied depending on property type. For
example, the retail sector utilized relatively shorter lags than the office
sector.
As to how Fitch's analysis figures into the general health of REITs heading into
the second half of the year, the short answer is 'more of the same'. Fitch
expects commercial real estate fundamentals to stay healthy in 2016 and cap
rates to increase modestly, primarily for lower physical and/or market quality
assets. Drilling down into specific property types, the outlook is optimistic
for multifamily and office and less so for industrial, with retail yielding more
of a mixed bag.
'U.S. REITs: Portfolio Performance Tethered to Macroeconomic Factors' is
available at 'www.fitchratings.com' or by clicking on the above link.
Contact:
Steven Marks
Managing Director, Head of U.S. REITs
Fitch Ratings, Inc., 33 Whitehall Street, New York, NY, 10004
Media Relations: Sandro Scenga, New York, Tel: +1 212-908-0278, Email:
sandro.scenga@fitchratings.com.
Additional information is available at www.fitchratings.com.
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