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REIT Bull Run Over?

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The seven-year bull run in global property and Real Estate Investment Trust (REIT) stocks finally stalled in the second quarter of 2007 in part due to the fall-out from the US subprime mortgage market, Standard & Poor's Index Services said in its Quarterly Global Property & REIT report.

The ratings agency noted that the S&P/Citigroup Global Property Index dropped 4.5 percent in the second quarter of 2007, while US property and REIT stocks in general declined. Europe and Asia were also badly affected, with the S&P/Citigroup Europe Property Index worst hit with falls of 10.4 percent.

Only emerging market property remained unscathed in the second quarter, resoundingly bucking the trend in more mature real estate sectors. An unexpectedly strong performer in 2006, the S&P/Citigroup Emerging Market Property Index posted gains of 19.4 percent for the quarter and 26.7 percent on a year-to-date basis, eclipsing the global property sector as well as exceeding the performance of comparable equity market indices. The top five performing property stocks globally came from emerging markets, including three from China.

“A prolonged seven-year stretch of continuous gains, leading to excessive valuations, decreasing yields and a legitimate desire for profit taking caused a sell off for this sector. After such a bull run, global property and REIT stocks finally gave back some of the returns that have made them such an attractive investment in the last few years,” Alka Banerjee, vice president of Standard & Poor's Index Services, said.

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Elaine Misonzhnik

Senior associate editor Elaine Misonzhnik has been writing for National Real Estate Investor since June 2006 and has covered commercial real estate for more than 12 years. She first became...
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