Uncertainty reigned over real estate stocks in January
By: Orion Jones
Markets climbed Friday afternoon on a better-than-expected jobs report, but it was not enough to undo the results of a topsy-turvy January that impacted real estate stocks alongside broader markets.
The Real Estate Select Sector Index, which generalizes how publicly traded real estate companies perform in the market, fell nearly 8 percent in the last month. The iShares ETF that tracks the performance of residential home builders fell 15 percent as supply chain snarls drove up construction costs, putting further pressure on a nationwide home shortage.
The Nasdaq Composite index fell 10 percent as shares of tech companies took a beating.
Proptech giant Zillow continued to slide, its share price falling 22 percent. It closed Friday at $48.94 per share, down 50 percent from the start of November, when it announced its retreat from the iBuying business due to faulty pricing algorithms. Meanwhile, a glut of proptech firms that went public through special mergers called SPACs have largely left investors deflated.
Office stocks also saw declines. While long-term leases have provided class-A office landlords such as Paramount Group some security, daily occupancy rates in major cities still hover around 20 percent.
Shares of Paramount fell 4 percent. SL Green was down 10 percent, while Vornado shares had fallen by more than 11 percent in the last month as of Friday’s closing bell.
“There’s a lot of uncertainty in office demand,” said John Kim, a REIT analyst at BMO. “It’s going to be a while before we see meaningful occupancy and rental growth.”
The outlook was also gloomy for retailers and their landlords. The S&P Retail ETF closed Friday down 13.7 percent in the last month. The share price of shopping mall giant Simon Property Group fell 12.4 percent.
Even industrial giant Prologis lost ground, despite sold-out inventory amid its broader sector’s continuing to boom. Its share price fell 4 percent this month. Behemoth Blackstone eked out a 7.5 percent gain.
Even perpetual winners in the stock market have diverged. Amazon set a record Friday for the largest daily gain in market value — about $190 million — while the company formerly known as Facebook recorded the largest daily loss earlier last week of more than $230 million, the Wall Street Journal reported.