NEW YORK--(BUSINESS WIRE)--Link to Fitch Ratings' Report: 1Q16 U.S. Equity REIT Liquidity:
Navigating Uncertain Waters
U.S. equity REITs have weathered the marketwide selloff of earlier this year and are in an improved liquidity position, though a Fitch Ratings special report says there are still some hurdles the sector needs to overcome.
The big impediment so far this year has been capital issuance, which is down compared to recent quarters. REIT capital issuance so far this year is 11.6% lower than the same period last year. Common equity and unsecured bond issuance also remains sluggish for REITs, with combined capital via these methods lagging the same period in 2015 by 26.1%. Amid the decline, healthcare REITs are still raising the most REIT capital among all major property types with 14.9% so far in 2016, this after leading the way with 21.6% last year.
The weaker capital access is overshadowing what are still very much healthy fundamentals for commercial real estate. Fitch expects fundamentals to remain healthy and for cap rates to increase modestly, primarily for lower physical and/or market quality assets. 'REITs are adjusting their bids for a higher cost of capital while marginal buyers remain on the sidelines until the CMBS market stabilizes,' said Managing Director Steven Marks.
That said, sector liquidity coverage remains strong and will likely remain so into the second half of the year. '1Q16 U.S. Equity REIT Liquidity: Navigating Uncertain Waters' is available at 'www.fitchratings.com' or by clicking on the above link.
Additional information is available at www.fitchratings.com.