REITs underperformed broader markets, but ended higher than last week as macro factors gave optimism.
The FTSE Nareit All Equity REITs index gained by 0.66%, while the Dow Jones Equity All REIT Total Return Index was up by 0.70%. Comparatively, S&P 500 saw an increase of 1.84% on a weekly basis.
The broader markets benefited from a fall in producer price inflation, which decreased by 0.1% in December compared to an increase of 0.1% expected.
Also, the Q4 earnings season kicked off on a good note as the five major banks that reported their earnings on Friday pulled in almost $66B of net interest income (+0.98% Q/Q and +4.9% Y/Y) despite a backdrop of highest interest rates in almost 23 years.
On the other hand, the Real Estate Select Sector SPDR ETF increased by 0.64% and the mortgage REITs index by 1.83%.
Office REITs as a subsector declined by 0.40% from last week, but the biggest movers of the week were remarkably from this category. Net Lease Office Properties (NYSE:NLOP), which gained by ~28% W/W, was the biggest gainer among REITs, while Office Properties Income Trust (NASDAQ:OPI) that fell by ~45% was the biggest laggard.
The risk profile of Office REITs has not materially improved or declined, but the market’s view on the subsector has. There is still appeal in investing in this category, but the best upside has passed and valuations have become less attractive, according to Seeking Alpha contributor Wolfe Report.
UMH Properties (NYSE:UMH) and Generation Income Properties (NASDAQ:GIPR) were the other top gainers of the week. Meanwhile, Wheeler Real Estate Investment Trust (NASDAQ:WHLR) that declined by ~22% was among the biggest losers.
Among subsectors, Self Storage saw the steepest decline of 2.27%, followed by Infrastructure that decreased by 1.96% in value.
Data centers and Health Care were the top gainers among subsectors, having risen by more than 3% this week. Diversified REITs also saw a notable gain, an average of 1.98%.
Here is a look at the subsector performance for last week:
