REITs Get Clobbered in October

For the first nine months of 2008, REITs trounced the broader stock market indexes. As of Sept. 30, equity REIT stock performance was up 1.76 percent for the year, according to the FTSE NAREIT Equity REIT Index. By contrast, the NASDAQ Composite was down 21.13 percent, the S&P 500 was down 19.29 percent and the Dow Jones Industrial Average was down 18.2 percent.Then came October. Through yesterday, the FTSE NAREIT Equity REIT Index had plunged 32.37 percent for the month of October. As of October 21, then, equity REITs had fallen 31.18 percent for the year. “October changed the REIT economy,” Ron Kuykendall (pictured), a spokesperson for the National Association of Real Estate Investment Trusts (NAREIT), told CPN. “REIT stocks gave up significant ground during the first three weeks of the month.” Over the same three-week period, of course, the financial industry suffered its disastrous meltdown. The major REIT property sectors all took a beating. Residential REITs, up a healthy 17.08 percent through September 30, found themselves down 15 percent for the year as of yesterday, having fallen 27.61 percent in the first 21 days of October. Retail REITs, down about 2.5 percent through the third quarter, yesterday showed a 40.62 percent decline for the year. The REIT office sector has fared a little better, but not much. Down about 2 percent through the third quarter, office REITs limped to the end of yesterday’s trading down 32.14 percent for the year. Industrial REITs have taken the biggest whack. Having a relatively bad year to begin with, industrial REITs were off about 12.5 percent during the first three quarters. Yesterday, they were down 62.75 percent for the year. Given that stock prices reflect investors’ expectations of the future, it is likely that nothing too bad has happened to REIT occupancy rates–yet. On the other hand, the investors that follow REITs apparently fear that the economic fundamentals responsible for REIT profits–employment, consumer spending and others–are headed for disaster.