S&P Global Market Intelligence offers our top picks of real estate news stories published throughout the week.

Office real estate investment trusts posted an 8.8% annual gain in net operating income to $2.68 billion in the third quarter of 2022, reflecting performance resiliency amid soaring inflation, Nareit said in its "Total REIT Industry Tracker Series" report.

Nareit is the U.S.-based trade association for REITs and publicly traded real estate companies.

Employers paid rents even while many employees abandoned working from offices, Nareit said.

Funds from operations exceeded pre-pandemic levels by 11.7% during the third quarter of 2022. Quarterly FFO declined just 1.9% on average from 2019 to 2020, Nareit said. Employment in the office sector, which indicates office demand, was also up.

The outlook for the sector is gloomy, however, as economic indicators point to a likely recession in 2023.

The office vacancy rate rose to 12.3% at the end of September 2022 from 9.2% at the end 2019, The Wall Street Journal reported, citing CoStar Group Inc. data. The amount of space available for sublease stands at roughly 211.8 million square feet, up from 108.8 million square feet in 2019. Additionally, new business searches for new office space fell in 2022 to 44% compared to figures in 2018 and 2019, the Journal reported, citing VTS, which tracks tenant demand.

If these conditions continue, building owners may find it challenging to pay mortgages, which could then impact the financial system. Office buildings back roughly $1.2 trillion of debt as of the end of the second quarter of 2022, the Journal reported, citing data from Trepp Inc.

CHART OF THE WEEK: US REIT indexes down in final week of 2022

⮞ The Dow Jones Equity All REIT index dropped 0.66% and the MSCI U.S. REIT (RMZ) index fell 0.67% in the week ended Dec. 30, 2022. The broader markets were mostly flat for the week.

⮞ The self-storage and office sectors recorded the largest decreases at 0.92% and 0.83%, respectively.

⮞ The best-performing companies were retail REIT InvenTrust Properties Corp. and healthcare-focused Healthcare Realty Trust Inc.

Megadeal

* The University of California is investing $4 billion in class I common shares of Blackstone Inc. unit Blackstone Real Estate Income Trust Inc. The private equity firm will also contribute $1 billion as part of the strategic venture between Blackstone and UC Investments.

New strategy

* New York City REIT Inc., as part of its plan to diversify its portfolio, seeks to drop its real estate income trust status and become a taxable C corporation.

Property transactions

* Realty Income Corp. agreed to buy up to 185 single-tenant retail and industrial properties from CIM Real Estate Finance Trust Inc. subsidiaries for a total of about $894 million in cash. The portfolio spans up to 4.6 million square feet and is leased to 55 retail tenants and four industrial clients.

* Gaming & Leisure Properties Inc. completed its acquisition of the land and real estate assets of Bally's Tiverton Casino & Hotel in Tiverton, R.I., and Bally’s Hard Rock Hotel & Casino Biloxi in Biloxi, Miss., from Bally's Corp. for a combined $635 million.

* Rexford Industrial Realty Inc. bought 10 industrial properties for a total of $336.2 million in cash and proceeds from forward equity settlements.

* Paris-based Unibail-Rodamco-Westfield completed the sale of Westfield Trumbull in Trumbull, Conn., and Westfield South Shore in Bay Shore N.Y., to an undisclosed commercial real estate investment firm for a combined $196 million.

Data Dispatch: NAV Monitor: US equity REITs end December 2022 at 20.8% discount to NAV