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 May 28, 2020  

Disruption 2020: Is REIT Pricing a Look Into the Future?

  • Will the private market follow the lead of the public markets in terms of valuation? Public markets have shown incredible volatility – private markets typically trade in a more stable, linear fashion.

  • Overall, the stocks in this analysis are down 23.4% from February 19 through May 27 – significantly below major stock indices.

  • REIT office prices have improved in recent days, declining a net 37.7% since February 19. Boston Properties has improved 13.8% since May 22.

  • Alexandria Real Estate Equities, a pure-play life science bet, has seen a relatively modest stock decline of 9.8% – more in line with major stock index pricing.

  • Data centers are unique in this environment, but industrial is the best-performing large-product sector.

  • It took three years for pricing to regain previous peaks after the Great Recession.

Will the private market follow the lead of the public markets in terms of valuation? The public markets have shown incredible volatility. Private markets typically trade in a more stable, linear fashion. The public markets are a real-time view of investor sentiment about companies but are beholden to large institutional movements in and out of positions. From February 19 (the historical peak of the S&P 500) through May 27, REIT stocks had fallen, in many cases more significantly than pricing in the indices of the broader U.S. equities market. In fact, multiple REITs had lower valuations on May 27 than they did at the end of the first quarter of 2020. REIT stock pricing has been volatile, sharply declining early in the pandemic, recovering, and then falling a second time, before a recent upswing. These REIT groupings, along with the S&P 500, Dow and Nasdaq indices have all gained value since the end of the first quarter of 2020.


CM_Disruption_REIT chart_by sectorUsing four large public REITs in each sector (determined by market cap and market relevance), we noted a gain in data center companies (7.2%), followed by losses in industrial (13.9%), multifamily (26.8%), healthcare (29.5%), office (37.7%) and retail (39.7%) - an average stock decline of 23.4%. It is important to note that the REIT healthcare category includes operators of eldercare facilities. The pure life science play is Alexandria Real Estate Equities, which posted a lower-than-average value decline in the February 19 through May 27 period and is down 9.8% from levels before the COVID-19 crisis, which is more in line with the broader market indices.

So far, only the retail sector’s values have declined in the range they did during the Great Recession. REIT stocks overall declined an average of 46.5% during the bear market of August 2008 to April 2009.

In different circumstances, it took REIT stocks three years to regain their previous high points during the Great Recession. It’s not clear yet how long the rebound will take this time around.

CM_Disruption_REITs_complete REIT data Table



Aaron Jodka
Managing Director, Research & Client Services
Frank Petz
Managing Director, Investment Sales
Nick Dessalines
Research Analyst
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