Positive start into the year 2023 – REITs strongly recover from disappointing year end 2022

Global stocks rebounded strongly in January.  Incoming economic data pointed to a less severe economic dip than feared. Furthermore, many companies published much better earnings than predicted. The headwinds for the markets therefore diminished significantly. Overall, it was Europe that did best for the fifth month in a row with a plus of +9.94 percent closely followed by North America with +4.78 percent. The Nikkei came in on the third place with a gain of +3.89 percent (all figures in EUR).

This very positive development was also reflected by the global REIT markets. With the exemption of North America, the other regional performances were slightly below the broader equity markets. Best region was North America with a gain of +9.10 percent, followed by Europe with +8.60 percent. Asia came in third with +1,83 percent. Overall, the EPRA Global REIT Index increased +7.90 percent last month (all figures in EUR). The UK REIT index was up +8.08 percent last month and is roundabout 52 basis points behind the European REIT index.

Our model portfolio and our fund “QSF-DeA Global REIT’s” closed last month with a significant gain. With a performance of +8,59 and +8,72 percent for January, both outperformed the Global REIT Index significantly. In addition, the model portfolio was able to achieve a dividend yield of +0.37 per cent (gross without withholding tax) for the first month of 2023.

Sectoral performance

All sectors in the REIT market ended the first month of 2023 in positive territory. The best performing sectors were hotels with +13.56 percent and data centers with +11.33 percent, closely followed by healthcare with +10.20 percent. After having been the worst performer in December, hotels rebounded sharply as further easing of covid restrictions brightened the outlook for better travel bookings in the coming months.

Investors continued to focus on data centers, as demand is still strong while supply has been weak in the last couple of months. This imbalance should give room for more rental growth in the future. Health-care REITs did well, especially those with large senior-housing operating portfolios. They showed significant occupancy improvement which should drive top- and bottom-line growth. Improving occupancy and accompanying rent growth are helping to offset inflationary wage increases that continue to pressure margins.

For retail REITs the picture is still mixed as the outlook for occupiers is difficult as costs are still rising  and consumer spending retreats. That could weigh on share prices.