Chaotic Exit • Storage Strength • Week Ahead
Summary
U.S. equity markets were mixed Monday as investors largely shrugged off renewed geopolitical concerns following a chaotic withdrawal from Afghanistan and weaker-than-expected economic data.
Adding to gains of 0.7% last week, the S&P 500 finished higher by 0.2% today while the Mid-Cap 400 finished lower by 0.2% and the Small-Cap 600 slipped 0.3%.
Real estate equities mixed today as the Equity REIT Index declined 0.1% with 15 of 19 property sectors in negative territory while Mortgage REITs declined by 0.6%.
Small-cap Global Self Storage (SELF) rallied 5% after reporting strong Q2 results this morning, consistent with the stellar trends across the self-storage sector in Q2.
The highlights of this week's economic calendar include Homebuilder Sentiment data and Retail Sales data on Tuesday and Housing Starts and Building Permits data on Wednesday,.
Real Estate Daily Recap
U.S. equity markets were mixed Monday as investors largely shrugged off renewed geopolitical concerns following a chaotic withdrawal from Afghanistan and weaker-than-expected economic data. Adding to gains of 0.7% last week, the S&P 500 finished higher by 0.2% today while the Mid-Cap 400 finished lower by 0.2% and the Small-Cap 600 slipped 0.3%. Commodities prices slipped while Gold (GLD) rallied. Real estate equities mixed today as the Equity REIT Index declined 0.1% with 15 of 19 property sectors in negative territory while Mortgage REITs declined by 0.6%.
As discussed in our Real Estate Weekly Outlook, investors have continued to be unfazed by the ongoing "fourth wave" of the COVID pandemic and data last week showing that U.S. consumers suffered a "stunning loss" in confidence in early August due primarily to soaring consumer price levels. Seven of the eleven GICS equity sectors finished higher on the day, led to the upside by the Healthcare (XLV) and Utilities (XLU) sectors. Homebuilders led the Hoya Capital Housing Index today ahead of a busy week of housing data and key earnings reports this week from Home Depot (HD) and Lowe's (LOW) on Tuesday and Wednesday, respectively.
We have another jam-packed slate of economic and housing data in the week ahead, kicking off on Tuesday with the NAHB Housing Market Index for August and continuing on Wednesday when we'll see Housing Starts and Building Permits data, which is expected to show a mild reacceleration in home construction activity in July as supply chain constraints begin to slowly ease and construction materials prices cool from extreme highs. We'll also get a look at Retail Sales data for July on Tuesday, which is expected to show a continued cool down from the stimulus-fueled record-highs set in April.
Equity REITs
Self-Storage: Small-cap Global Self Storage (SELF) rallied 5% after reporting strong Q2 results this morning, consistent with the stellar trends across the self-storage sector in Q2. SELF reported that its same-store revenues surged 11.2%, driving same-store NOI growth of 17.9%. SELF also reported that same-store occupancy increased to a record 96.3% from 92.9% at June 30, 2020. Catalyzed by the suburban housing boom and the desire for more space, self-storage demand has dramatically rebounded over the last twelve months, powering the most comprehensive "beat and raise" quarter for any REIT sector in recent memory.
Office: NYC-focused office REITs including SL Green (SLG) were under pressure today after news that State Street is vacating its offices in New York City. A year into the pandemic, office utilization in major U.S. cities remains a fraction of pre-pandemic levels with coastal cities facing a particularly slow recovery as an increasing number of major corporations have announced delays in their plans to return to the office. Office REIT results this quarter underscored the widening bifurcation between coastal urban REITs and office REITs focused on secondary and Sunbelt markets. Led by strong results from Cousins (CUZ), Highwoods (HIW), and Piedmont (PDM), 6 of the 7 that raised their full-year outlook were secondary/suburban-focused REITs.
Mortgage REITs
Per our Mortgage REIT Tracker available to The REIT Forum subscribers, residential mREITs finished lower by 0.7% today after ending last week with 0.5% gains. Commercial mREITs slipped 0.4% following declines of 0.5% last week. Sachem Capital (SACH) declined 0.6% today after reporting Q2 results this morning that were roughly in line with expectations, as the small-cap mREIT reported a 56% increase in it revenue from Q2 of last year.
REIT Preferreds & Capital Raising
Per the REIT Preferreds & Bond Tracker available to The REIT Forum subscribers, REIT Preferred stocks finished flat today, on average, and outperformed their respective common stock issues by an average of 0.87%. So far in 2021, REIT Preferred stocks are higher by 8.65% on a price return basis. The average REIT preferred pays a current yield of 6.03% and trades at a slight premium to par value.
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Additional Disclosure: It is not possible to invest directly in an index. Index performance cited in this commentary does not reflect the performance of any fund or other account managed or serviced by Hoya Capital Real Estate. Data quoted represents past performance, which is no guarantee of future results. Information presented is believed to be factual and up-to-date, but we do not guarantee its accuracy.