US real estate investment trust share prices continued to fall during the second quarter of 2024, underperforming the broader stock market.
The Dow Jones Equity All REIT Index generated a total return of negative 0.9% for the quarter, compared to a 4.3% return for the S&P 500.
On a one-year basis, the Dow Jones Equity All REIT Index logged a total return of 5.7%, while the S&P 500's return was a strong 24.6% for the same period.
Sector returns
By property sector, the industrial REIT index fell the furthest in the second quarter, with a return of negative 10%.
Within the industrial sector, Industrial Logistics Properties Trust had the lowest return of the quarter, at negative 14%, followed by Prologis Inc., the largest industrial REIT by market capitalization, at negative 13%.
Prologis' share price, along with many of the other industrial REITs, fell significantly following the REIT's first-quarter earnings release on April 17, when the REIT lowered its 2024 earnings guidance. Management cited a slowdown in leasing activity and net absorption as tenants focused on controlling costs amid high interest rates and persistent inflation.
Demand for industrial space increased substantially during the COVID-19 pandemic, as tenants rushed to acquire more space amid a soaring online shopping and e-commerce sale environment. Demand for industrial space has since cooled off, with some tenants leasing more space during the pandemic than was needed for the long term.
Other industrial REITs with double-digit negative returns for the second quarter included Rexford Industrial Realty Inc. and Terreno Realty Corp.
The Dow Jones US Real Estate Hotels Index had the second-lowest return for the quarter, at negative 6.6%, followed by the office REIT index at negative 4.4%.
On the other hand, both the apartment REIT and healthcare REIT indexes generated strong returns during the second quarter, at 11.8% and 11.5%, respectively. The Dow Jones US Real Estate Self Storage Index also outperformed the S&P 500, with a return of 4.7% during the quarter.
Bottom-performing REITs
Communications REIT Uniti Group Inc. closed the second quarter as the worst-performing REIT stock above $200 million market capitalization, with a return of negative 47.8%.
Uniti Group's share price fell significantly on the trading days following the REIT's first-quarter earnings release May 3, in which the REIT announced a controversial merger with Windstream Holdings II LLC. Under the terms of the deal, Windstream shareholders will receive $425 million of cash, $575 million of preferred equity as well as common stock representing approximately 38% of the combined entity. Uniti Group will be taking on additional debt to help fund the cash portion of the deal, tapping into its revolving credit facility as well as issuing $300 million of senior secured notes with a 10.5% coupon rate due 2028.
Additionally, Uniti Group plans to terminate its REIT tax status and transition into a taxable C-corporation, as well as suspend its common dividend.
Diversified REIT Peakstone Realty Trust, which focuses on office and industrial properties, had the second-lowest return of the quarter, at negative 32.9%, followed by office REIT Hudson Pacific Properties Inc. at negative 24.7%.
Top-performing REITs
Healthcare REIT Diversified Healthcare Trust finished the quarter with the highest return, after being the bottom-performing REIT stock the quarter prior. Diversified Healthcare Trust closed the quarter with a total return of 24.5%.
Two multifamily REITs, NexPoint Residential Trust Inc. and Centerspace, rounded out the top three with returns of 24.3% and 19.7%, respectively.
Eight other multifamily REITs ranked among the 25 top-performing REIT stocks above $200 market capitalization for the quarter.
