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Retail REITs Down Again

Update 2:45 PM

Update 2 4:41 PM

I posted about REITs sliding yesterday. It's happening again today. The news about Macerich and Developers Diversified doesn't seem to be helping. DDR is down almost 12 percent and Macerich down nearly 16 percent as I write this. But the declines are across the board. General Growth is the only retail REIT in positive territory up 3.3 percent for the day. The losses are not isolated to retail REITs. The Morgan Stanley REIT index is down 9 percent today. But the losses do seem to be more acute at many retail REITs.

I imagine the grim retail sales figures are playing into this. But is there more at work?

Update: I just did a little math. The Morgan Stanley REIT index closed on Friday, Sept. 19 at 913.61--it's highest point since June. That weekend, of course, was when the credit crunch morphed into full-fledged crisis mode. It was the weekend Lehman wasn't bailed out, Bank of America agreed to buy Merrill and just a couple of days before the government nationalized AIG. Since that point, the Morgan Stanley index has lost about 34 percent of its value. (It's now down about 7.4 percent for the day, up a bit from its session lows). In that same time period, the Dow Jones Industrial Average has dropped 22 percent.

The question is, does that make sense?

Update 2: The market ended the day on a major down note. The Dow Jones Industrial Average fell 7.9 percent. The Morgan Stanley REIT Index ended up down 12.9 percent. The Morgan Stanley REIT index had its highest ever close on February 7, 2007 at 1,233.66. At today's close it stands at 565.42. That means its dropped 54.1 percent.

If REIT values are a proxy for commercial real estate values--which is something I've heard argued--then that would mean commercial real estate values have been cut in half in the past 18 months. But, I don't think that makes much sense.

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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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