Global Market Review
The U.S. REIT market outperformed the European and Asian REIT markets in the second quarter. Global REITs were up over 10% during the quarter. Investors shrugged off uncertainty around the duration of the global pandemic and the shape of the recovery and focused on positive vaccine news, green shoots of economic activity and massive government stimulus including credit market support to bridge the economic gap. A wave 2 of virus outbreaks in areas that have re-opened, further lockdowns, a lack of additional robust government stimulus and U.S. election uncertainty remain the main barriers to fully turn investor sentiment. Active management continues to be an important tool in the investor toolbox in a world of uncertainty and return dispersion across property types and regions.
Global REITs were more impacted in the selloff than in past cycles due to the closure of social gathering real estate in most parts of the world. Additionally, formerly defensive property types like assisted living are more negatively impacted by the virus. Rent collections continue to be problematic in retail and for some net lease companies. We have already seen several retail tenant bankruptcies and store closings and expect more to occur as the pandemic persists. Regional malls will have a lot of vacant space to re-lease in a recession amid continued e-commerce disruption of bricks and mortar real estate. A few of the high profile bankruptcies include JC Penny, Nieman Marcus, J Crew, and Ascena brands.