Fitch: U.S. REIT Performance Tethered to GDP & Unemployment

NEW YORK--(BUSINESS WIRE)-- 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

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.

Additional information is available at www.fitchratings.com.

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View source version on businesswire.com: http://www.businesswire.com/news/home/20160602005942/en/

Fitch Ratings
Steven Marks
Managing Director, Head of U.S. REITs
Fitch Ratings, Inc., 33 Whitehall Street, New York, NY, 10004
or
Media Relations:
Sandro Scenga, +1 212-908-0278
[email protected]

Source: Fitch Ratings

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