Rally's Over: REIT Index Heads for Worst Year Since 2008
After a six year rise of 348%, REITs are no longer at the top of investors' minds. Friday's close shows an index of REIT stocks to be on its way to having its worst year since 2008, dropping by 9.8% after a 30% gain just a year ago. (By comparison, the S&P 500 is down "just" 5.4% after a 14% gain last year). China's floundering economy and a pending interest rate jump have investors on edge. This year, through August alone, investors pulled out almost $1.4B from the BlackRock-managed iShares US Real Estate exchange-traded fund. An interest rate jump could pose a serious problem for REITs that tend to have longer-term leases with tenants, such as some healthcare REITs, CBRE Clarion Securities CEO Ritson Ferguson says. Hotels, on the other hand, change every day, so they can adjust better to market conditions, he says. Fed Chairwoman Janet Yellen says it's possible economic conditions could warrant a hike by the end of the year. [WSJ]
