Headwinds Facing Office REITs

A recent article by Green Street Advisors has a good point about offices in general while providing a picture of the valuation of the office segment:

Source: Headwinds in Office Real Estate: A Sector in Transition

And a Bloomberg chart about the performance of the Bloomberg Office Property Index in the last 12 months as of the close of 10/25:

Source: Bloomberg

The index is at a critical point, attacking the green resistance line. As the office sector is a quite big component of REIT ETFs and Indexes, a break above this trendline could be a game changer.

 

REITs vs Banks

This is my favorite chart from Friday’s links:

Source: Bonds Could Be The Catalyst To Take Stocks Much Higher

While REITs have held up pretty well recently, the 10y yield recently broke out of the triangle pictured above and is now above 3%.

Will this be a game changer for REITs? I have no idea, but the 10y yield is definitely an important indicator to watch.

 

Disclosure: We have no positions in KRE or IYR. We are long VNQ.

Is Real Estate Finally Bottoming?

An interesting development is taking place on this chart:

Source: Bloomberg

The ratio chart (relative strength) of Global Real Estate versus Global Equity seems to be “bottoming”. What is different from the previous attempt in 2017 is that this ratio line has already crossed the 26-week moving average, which has been a pretty good indicator of previous trend changes. How this plays out is an unknown, but there is a good chance that until rates are not increasing dramatically, we’ll see a pullback to the previous support level.

 

Disclosure: We have no positions in RWO.