Nareit has shed light on how the Trump administration’s tariff policies have been creating a volatile and unpredictable environment for REIT investment performance, describing the situation as a “game-on, game-off” scenario due to the erratic decisions on tariffs.
Tracking market conditions has been challenging, with the yield on the 10-year Treasury fluctuating significantly-from a peak of 4.9% in mid-January to a low of 3.9% in early April, then rising again to 4.17% by the end of April, and reaching 4.33% by May 2, likely influenced by a surge in stock prices, which often move inversely to yields. According to a Bloomberg economist consensus, the probability of a U.S. recession within the next 12 months stands at 45%, while Moody’s chief economist Mark Zandi recently estimated a roughly 50% chance of a global recession this year.
Following the announcement of reciprocal tariffs on April 2, total returns across all 13 equity REIT sectors began to decline, but they rebounded after the temporary suspension of most of the tariffs. The swings in total returns were particularly pronounced between April 2 and April 8, followed by recoveries from April 9 through April 30. The effects varied widely by sector. Industrial REITs experienced the steepest initial drop of 18.9%, reflecting their close connection to warehousing and logistics affected by tariffs, but then rebounded by 12.2%. Similarly, lodging/resorts fell 16% before recovering 11.6%, healthcare dropped 10.6% before rising 8.8%, retail declined 12.1% and rebounded 10.3%, telecommunications fell 7.3% before climbing to 12% and data centers dropped 8.4% ahead of a surge to 16.9%. Despite these recoveries, most sectors did not fully recoup their initial losses.
Between April 2 and April 30, only data centers, telecommunications, and specialty sectors showed net gains of 7.1%, 3.8%, and 0.8%, respectively. The largest net declines were seen in timberland (-11.7%), industrial (-9.1%), office (-6.9%), lodging/resorts (-6.3%), and both residential and diversified sectors (each -3.7%). Overall, the FTSE Nareit All Equity REITs Index declined by 2.1% since the April 2 tariff announcement.
These fluctuations affected REITs regardless of their financial strength or operational performance, with even those boasting solid balance sheets feeling the impact. Nareit noted that ongoing and unpredictable tariff actions are likely to continue influencing REIT investment performance going forward.
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