The third quarter saw globally listed REITs suffering a negative return in dollar terms of 11.4%, bring their losses for the year so far to 29.4%, their worst-ever start in a year. European REITs perform even worse, down on average 40.2% this year so far.
The latest "Quarterly Manager Q3 2022" commentary from alternative investment manager Hazelview Investments shows how differently various regions around the world performed. Europe has suffered the most, due to the war in Ukraine and the subsequent energy crisis and persistent inflation. Japan has performed the best over the first nine months, actually showing a positive total return of 2.9%.
Claudia Reich Floyd, portfolio manager for global real estate equities and head of Hazelview's German office in Hamburg, said: "The main cause of the decline in REIT prices is rising real interest rates and widening credit spreads. But positive earnings revisions have increased since the beginning of the year. This shows how resilient commercial and residential real estate cash flows are in times of high inflation and market turmoil." And, despite many German listed stocks recovering somewhat from recent lows, she points to the somewhat significant discounts in property price of more than 30% on international average.
Both the OECD and the IMF published very gloomy outlooks for 2023 for economic growth, with the Hazelview study advising caution on offices, retirement homes and regional shopping centres.
But the Hazelview economists see some bright spots. "In Europe, for example, we currently see the most attractive opportunities in the residential, logistics and mobile phone tower sectors," said Reich Floyd.
