Real estate stocks ended the week in red, alongside major market averages, amid a lingering government shutdown and renewed trade war concerns.
“The government shutdown is rolling over into week two, and this is where the volatility starts to rise… The increase in volatility is likely to trigger a deep correction in the stock market, given the bubble-like valuations,” said Seeking Alpha analyst Damir Tokic.
- Read more on what SA analysts have to say about the shutdown and its impacts on the broader market here.
Prediction market Kalshi sees the U.S. government shutdown lasting 26 days.
The Trump administration has sent layoff notices to thousands of federal employees across multiple agencies.
For the residential real estate market, thousands of home sales are likely to be held up, CNBC News reported. The federal flood insurance program may not be able to issue new policies; the Federal Housing Administration, Department of Veteran Affairs, and Department of Agriculture might slow or suspend their mortgage processing; and the IRS might not process tax transcripts or income verification documents quickly.
For commercial real estate, the impact may reportedly not be quite as immediate, but it is likely to be much more far-reaching. A delay in government data may cause uncertainty in the financial markets, which could affect commercial real estate dealmaking, especially for small businesses. Investor confidence could be hit, and on an immediate basis, a pullback in consumer demand can be seen.
Retail and hospitality could see a quick impact, while skilled nursing facilities and senior care properties could also see deal delays, the report noted.
To add to the issues, U.S. markets saw a sharp sell-off on Friday, triggered by the resurgence of tariff concerns.
President Donald Trump threatened higher tariffs to China, saying it had “become very hostile” sending letters to other countries wanting to “impose export controls.”
The S&P 500 Real Estate Index Sector (SP500-60) declined 3.30% during the week to close at 255.48, while its accompanying Real Estate Select Sector SPDR Fund ETF (NYSEARCA:XLRE) was down 3.33% to 40.68.
The Dow Jones REIT Indx Equity REIT Total Return Index (NASDAQ:REIT:IND) retreated 3.19%, while the FTSE Nareit All Equity REITs index fell 3.23%.
Next week, investors will have their heads on a swivel to see if the U.S. and China can get closer to a trade deal. Meanwhile, the stalemate between Republicans and Democrats over the government shutdown will roll into its second full week.
Also, Wall Street will see the quarterly earnings season kick off, with large financial institutions reporting their results.
On Friday, the September Housing Starts report is scheduled to be released by the U.S. Census Bureau and the U.S. Department of Housing and Urban Development.
Investors will also keep a close watch on the Consumer Credit and the Consumer Sentiment report to gauge consumer demand.
Company News
- SBA Communications (SBAC) found a place among JPMorgan’s top four short ideas in media and telecom stocks under the technology sector.
- Uniti Group (UNIT) priced a $250M offering of secured fiber network revenue term notes.
- LandBridge Company (LB) has finalized the sale of a solar project to a publicly-traded energy infrastructure developer.
- Braemar Hotels & Resorts (BHR) has entered into a definitive agreement to sell The Clancy, a 410-room hotel in San Francisco, for $115M.
- Newmark Group (NMRK) has acquired RealFoundations, a global real estate consulting and managed services firm.
- LTC Properties (LTC) sold two skilled nursing centers in Florida for total proceeds of $42M, with an expected gain on sale of about $28M.
- Alpine Income Property Trust (PINE) has acquired a three-property portfolio for $2.8 million, yielding a weighted average cash return of 8.5%.
- Innovative Industrial Properties (IIPR) has closed on a new $100M secured revolving credit facility with a federally regulated commercial bank.
- BRT APARTMENTS (BRT) has acquired a 150-unit garden-style apartment complex in Savannah, Georgia, for $23.0M.
- Notable dividend announcements came from Industrial Logistics Properties (ILPT), Service Properties Trust (SVC), Franklin Street Properties (FSP), RMR (RMR), Diversified Healthcare Trust (DHC), STAG Industrial (STAG), and Healthpeak Properties (DOC).
Winners & Losers
Among the S&P 500 real estate stocks, Alexandria Real Estate Equities (ARE) was on a five-day losing streak. The stock retreated 11.79% from the prior week to close at $73.92.
Last week, CEO Peter Moglia was said to have sold 743 shares of common stock in the healthcare REIT at $83.34 per share.
CoStar Group (CSGP), shedding 10.87% from the prior week to end at $75.58, was the next major weekly loser. CSGP was followed by BXP (BXP) (-8.09% W/W to $69.49).
Equinix (EQIX) (+2.81% W/W to $800.60), Crown Castle (CCI) (+2.23% W/W to $97.58), and Public Storage (PSA) (+0.30% W/W to $294.42) were the outliers.
In the broader real estate category, Generation Income Properties (GIPR) (-28.05% W/W to $1.18), Offerpad Solutions (OPAD) (-28.00% W/W to $2.88), and Service Properties Trust (SVC) (-14.02% W/W to $2.27) led the week’s losers.
Here is a look at the subsector performances for the week:
Percentage-wise price change across real estate indices