State Of REIT Nation: Waiting At The Bottom

seekingalpha06-10

REITweek, the annual REIT industry conference, was held last week in New York City. Humbled by two years of rate-driven headwinds, the venue halls were as quiet as any REITweek.Excitement was muted ...

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Humbled by two years of rate-driven headwinds, the venue halls were as quiet as any REITweek.Excitement was muted ...</p>\n\n<a href=\"https://seekingalpha.com/article/4698363-state-of-reit-nation-waiting-at-the-bottom\">Source Link</a>\n\n</div>\n","source":"seekingalpha","html":"<!DOCTYPE html>\n<html>\n<head>\n<meta http-equiv=\"Content-Type\" content=\"text/html; charset=utf-8\" />\n<meta name=\"viewport\" content=\"width=device-width,initial-scale=1.0,minimum-scale=1.0,maximum-scale=1.0,user-scalable=no\"/>\n<meta name=\"format-detection\" content=\"telephone=no,email=no,address=no\" />\n<title>State Of REIT Nation: Waiting At The Bottom</title>\n<style type=\"text/css\">\na,abbr,acronym,address,applet,article,aside,audio,b,big,blockquote,body,canvas,caption,center,cite,code,dd,del,details,dfn,div,dl,dt,\nem,embed,fieldset,figcaption,figure,footer,form,h1,h2,h3,h4,h5,h6,header,hgroup,html,i,iframe,img,ins,kbd,label,legend,li,mark,menu,nav,\nobject,ol,output,p,pre,q,ruby,s,samp,section,small,span,strike,strong,sub,summary,sup,table,tbody,td,tfoot,th,thead,time,tr,tt,u,ul,var,video{ font:inherit;margin:0;padding:0;vertical-align:baseline;border:0 }\nbody{ font-size:16px; line-height:1.5; color:#999; background:transparent; }\n.wrapper{ overflow:hidden;word-break:break-all;padding:10px; }\nh1,h2{ font-weight:normal; line-height:1.35; margin-bottom:.6em; }\nh3,h4,h5,h6{ line-height:1.35; margin-bottom:1em; }\nh1{ font-size:24px; }\nh2{ font-size:20px; }\nh3{ font-size:18px; }\nh4{ font-size:16px; }\nh5{ font-size:14px; }\nh6{ font-size:12px; }\np,ul,ol,blockquote,dl,table{ margin:1.2em 0; }\nul,ol{ margin-left:2em; }\nul{ list-style:disc; }\nol{ list-style:decimal; }\nli,li p{ margin:10px 0;}\nimg{ max-width:100%;display:block;margin:0 auto 1em; }\nblockquote{ color:#B5B2B1; border-left:3px solid #aaa; padding:1em; }\nstrong,b{font-weight:bold;}\nem,i{font-style:italic;}\ntable{ width:100%;border-collapse:collapse;border-spacing:1px;margin:1em 0;font-size:.9em; }\nth,td{ padding:5px;text-align:left;border:1px solid #aaa; }\nth{ font-weight:bold;background:#5d5d5d; }\n.symbol-link{font-weight:bold;}\n/* header{ border-bottom:1px solid #494756; } */\n.title{ margin:0 0 8px;line-height:1.3;color:#ddd; }\n.meta {color:#5e5c6d;font-size:13px;margin:0 0 .5em; }\na{text-decoration:none; color:#2a4b87;}\n.meta .head { display: inline-block; overflow: hidden}\n.head .h-thumb { width: 30px; height: 30px; margin: 0; padding: 0; border-radius: 50%; float: left;}\n.head .h-content { margin: 0; padding: 0 0 0 9px; float: left;}\n.head .h-name {font-size: 13px; color: #eee; margin: 0;}\n.head .h-time {font-size: 11px; color: #7E829C; margin: 0;line-height: 11px;}\n.small {font-size: 12.5px; display: inline-block; transform: scale(0.9); -webkit-transform: scale(0.9); transform-origin: left; -webkit-transform-origin: left;}\n.smaller {font-size: 12.5px; display: inline-block; transform: scale(0.8); -webkit-transform: scale(0.8); transform-origin: left; -webkit-transform-origin: left;}\n.bt-text {font-size: 12px;margin: 1.5em 0 0 0}\n.bt-text p {margin: 0}\n</style>\n</head>\n<body>\n<div class=\"wrapper\">\n<header>\n<h2 class=\"title\">\nState Of REIT Nation: Waiting At The Bottom\n</h2>\n\n<h4 class=\"meta\">\n\n\n2024-06-10 21:00 GMT+8&nbsp;&nbsp;&nbsp;<a href=https://seekingalpha.com/article/4698363-state-of-reit-nation-waiting-at-the-bottom><strong>seekingalpha</strong></a>\n\n\n</h4>\n\n</header>\n<article>\n<div>\n<p>REITweek, the annual REIT industry conference, was held last week in New York City. Humbled by two years of rate-driven headwinds, the venue halls were as quiet as any REITweek.Excitement was muted ...</p>\n\n<a href=\"https://seekingalpha.com/article/4698363-state-of-reit-nation-waiting-at-the-bottom\">Source Link</a>\n\n</div>\n\n\n</article>\n</div>\n</body>\n</html>\n","isBrief":false,"type":0,"news_type":1,"symbol":"UPRO","symbol_name":"三倍做多标普500ETF","start_time":0,"source_url":"https://seekingalpha.com/article/4698363-state-of-reit-nation-waiting-at-the-bottom","article_id":"2442412708","we_media_id":null,"thumbnails":["https://static.seekingalpha.com/cdn/s3/uploads/getty_images/1126705091/image_1126705091.jpg"],"rights":null,"url":"https://stock-news.laohu8.com/highlight/detail?id=2442412708","pubTimestamp":1718024400,"sourceInfo":{"source_id":"seekingalpha","name":"Seeking Alpha"},"weMediaInfo":null,"summary":"REITweek, the annual REIT industry conference, was held last week in New York City. 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Humbled by two years of rate-driven headwinds, the venue halls were as quiet as any REITweek.Excitement was muted after numerous \"false starts\" on the long-awaited Fed pivot, a dearth of IPO and M&A activity, and a two-year period of significant underperformance versus the broader market.It can only get better: since the start of the Fed's rate hike cycle in March 2022, the REIT Index has underperformed the S&P 500 by a whopping 40 percentage-points.Tempered optimism was the prevailing sentiment among REIT executives. Most discussed steady-to-strong property-level fundamentals, but also an uptick in debt-driven distress among some of their private market peers.\"Delay and pray\" has remained the strategy for many highly-levered property owners amid a dearth of buying interest and limited capital availability. Public REITs have opted to remain on the sidelines, but we expect opportunities to emerge as private markets bottom-out.   Yongyuan Dai State of the REIT Nation In our State of the REIT Nation, we analyze the recently-released NAREIT T-Tracker data. Earlier this month, we published our REIT Earnings Recap which analyzed Q1 results on a company-by-company level, but this report will focus on higher-level macro themes affecting the REIT sector at large.   Hoya Capital REITweek, the annual REIT industry conference, was held last week in New York City. Humbled by two years of rate-driven headwinds, the venue halls in the Midtown Hilton were as quiet as any REITweek in recent memory. A flurry of REIT mergers preceded the event last year - which brought some lively discussion and speculation of potential deals - an energy and excitement that was sorely lacking this year. Optimism was muted after numerous \"false starts\" on the long-awaited Fed pivot, a dearth of IPO and M&A activity, and a two-year period of significant underperformance versus the broader market. Since the start of the Fed's rate hike cycle in March 2022, the Equity REIT Index (VNQ) has underperformed the S&P 500 (SPY) by a whopping 40 percentage points, the worst stretch of relative performance on record. Among the 11 GICS equity market sectors, the real estate is the only sector in negative-territory during this time, trailing other rate-sensitive sectors including Utilities (XLU) and Consumer Staples (XLP) by 20 percentage points and the Technology (XLE) sector by nearly 60 percentage points. Hoya Capital Tempered optimism was the prevailing sentiment among REIT executives. Most discussed steady-to-strong property-level fundamentals, but also an uptick in debt-driven distress among some of their private market peers. Real estate markets - both commercial and residential - have been the most direct transmission mechanism of the Federal Reserve's historically swift monetary tightening cycle, which resulted in the largest increase in the Federal Funds rate in any two-year period since 1981 on an absolute basis and the single-most significant increase on a percentage basis. Concern about real estate is warranted given that the two prior rate hike cycles that exceeded 400 basis points - the late 1980s cycle that sparked the Savings & Loan Crisis and the mid-2000s cycle that sparked the Great Financial Crisis - resulted in significant distress and disruption within in the real estate industry. This concern has resulted in a nearly one-to-one correlation between REIT valuations and benchmark long-term interest rates during the Fed's rate hiking cycle and subsequent \"pause\" at the 5.50% upper-bound.   Hoya Capital With just 1.5 Fed rate cuts now expected this year - down from a peak of nearly seven implied by swaps markets back in January - expectations of \"Higher for Longer\" have merely shifted to \"High for Long\" - and that remains a problem for many private equity funds and some highly-levered REITs were ill-prepared for a period of sustained 4-5%+ benchmark rates, nor for a period of double-digit percentage point declines in property values. Green Street Advisors' data shows that private-market values of commercial real estate properties have dipped by 20.9% from the peaks in April 2022 and have now given back all of their pandemic-era gains. Property values have stabilized in 2024, however, with the CPPI showing a 1% YTD uptick. By comparison, the peak-to-trough drawdown in this valuation index during the Great Financial Crisis was 30%. We've noted that the 20-25% drawdown level can be a critical \"capitulation threshold\" - a level that matches the maximum Loan-to-Value (\"LTV\") ratio accepted by conventional commercial real estate lenders. Hoya Capital \"Delay and pray\" has remained the strategy for many highly-levered property owners amid a dearth of buying interest and limited capital availability. Public REITs have opted to remain on the sidelines, but we expect opportunities to emerge as private markets bottom-out. Recent data and anecdotes suggest that - for these over-levered private market players - it'll likely get worse before it gets better. The Mortgage Bankers Association reports that roughly 20% of the $4.7 trillion of outstanding commercial mortgages held by lenders and investors will mature in 2024 - a relatively manageable sum for the broader real estate sector - but the clock is ticking ever louder for the firms sitting on a significant pool of variable rate debt, and it's beginning to slowly-but-surely show-up in delinquency and distress rates. We track three delinquency measures - Fitch's CMBS Delinquency Rate, Trepp's CMBS Delinquency Rate, and Trepp's CMBS Special Servicing Rate. Trepp reported last week that its Special Servicing Rate - which tracks earlier thresholds of distress before a default event - climbed to 8.11% last month - the biggest monthly jump in four years - and nearly double the rate when the Fed began its hiking cycle in March 2022. Until the recent jump in multifamily special servicing rates last month, office delinquencies had accounted for effectively all of the increase, surging from below 3% in 2021 to nearly 11% last month.   Hoya Capital Resilient property-level fundamentals are the major reason that we haven't seen a more material increase in distress in non-office sectors. Fundamentals remain solid-to-strong across nearly every property sector, with the notable exception of coastal office properties. Public REITs reported that \"same-store\" property-level income, on average, was 13.2% above pre-pandemic levels in the first quarter. The residential, industrial, and technology sectors have been the upside standouts throughout the pandemic, with most of these REITs reporting NOI levels that are over 20% above 2019 levels. Even the battered office REIT sector has posted positive 10% growth in property-level cash flows since 2019 as tenants in long-term leases continue to pay rents. Retail REITs - which had seen sharp declines in property-level cash flows early in the pandemic due to missed rent payments - have posted some of the more impressive property-level performance in recent quarters, while Senior Housing REITs have also enjoyed a swift NOI rebound this year.   Hoya Capital The interest rate headwinds become very \"real\" when the underlying properties are financed with debt - particularly copious amounts of variable rate debt. With the scars of the Great Financial Crisis still visible, most public REITs were \"preparing for winter\" for the last decade, often to the frustration of some investors who turned to higher-leveraged and riskier alternatives in recent years. Private market players and non-traded REIT platforms were willing to take on more leverage and finance operations with short-term and variable-rate debt - a strategy that worked well in a near-zero rate environment, but quickly crumbles when financing costs double or triple in a matter of months. Nareit reported earlier this year that nearly 50% of private real estate debt is priced based on variable rates, compared to under 10% for public REITs. We've observed significant pain inflicted on the handful of public REITs that entered this period with variable rate debt loads in the 20-30% range - still relatively low compared to typical private equity firms - resulting in double-digit percentage point drags on Funds from Operations (\"FFO\").   Hoya Capital Access to long-term debt is perhaps the most distinct competitive advantage of the public REIT model, but it's an advantage that hardly gave public REITs much of an edge when debt capital was cheap and plentiful in the \"zero-rate\" economic environment of the 2010s. Compared to private institutions, publicly-traded REITs had far greater access to fixed-rate unsecured debt - which is usually in the form of 5-10 year corporate bonds. This allowed REITs to lock-in these fixed rates on 90% of their debt while simultaneously pushing their average debt maturity to nearly 7 years, on average, thus avoiding the need to refinance during these highly unfavorable market conditions. Even with the significant pullback in financing activity in recent months, the average term-to-maturity for public REITs is still over 6 years - well above the pre-GFC highs of around 4 years - and significantly above the weighted average term-to-maturity of around 3 years for private real estate assets. Hence, for many of the highly-levered players that lacked access to long-term capital, the trends observed in the chart below are magnified by a factor of 2-3x. Hoya Capital Case Study: Non-Traded REIT Distress There's been no better example of these trends than Blackstone's (BX) flagship private/non-traded REIT (\"NTR\") fund, BREIT, which has been forced to offload its best-performing assets over the past two years as it seeks to raise capital to meet investor redemptions while simultaneously seeking to avoid a \"mark-to-market\" on many of its other assets - including five public equity REITs - that it acquired for significant premiums at the peak of the market in 2021. Since it began limiting redemptions in November 2022, BREIT investors have received cumulative redemption requests of $53B from the roughly $100B nontraded fund, on which BREIT has fulfilled roughly $21B (39%). While BREIT appeared to turn the corner in early 2024 - buying another pair of public REITs at significant premiums - redemption requests again accelerated in May, prompting BREIT to modify its redemption limits to enable it to meet 100% of these requests, blaming its smaller nontraded peer Starwood REIT, which announced stricter redemption limits in late May.   Hoya Capital Distress for some is an opportunity for others, and we've begun to see - on a limited scale - public REITs with balance sheet firepower start to take advantage of capitulation from highly-levered players - a trend that will gather steam if debt markets remain tight. Since December 2022, BREIT has sold over $10B in assets to public REITs including its most recent $1B sale of an industrial portfolio to Rexford, which follows a $5.5B sale of two Las Vegas casinos to VICI Properties, an $800M sale of a Texas resort to Ryman Hospitality, a $2.2B sale of Simply Self-Storage to $Public Storage(PSA-N)$, and a $950M partial sale of The Bellagio casino to Realty Income. Concurrently, we saw a modest rebound in M&A activity from within the public REIT sector itself last year, with nine public REIT-to-REIT mergers in 2023 headlined by two major deals late in the year: net lease REIT Realty Income's (O) acquisition of Spirit Realty, and healthcare REIT Healthpeak's (DOC) acquisition of medical office REIT Physicians Realty. This pair of mergers follow a handful of significant mergers earlier this year, the largest of which was the deal between ExtraSpace (EXR) and Life Storage. We also saw two mergers in the strip center space: Regency Centers (REG) acquired small-cap Urstadt Biddle, while Kimco Realty (KIM) acquired mid-cap RPT Realty. Hoya Capital While REIT stock prices don't yet reflect it, macroeconomic conditions are evolving in an ideal manner for public REITs to finally exploit their competitive advantage - access to nimble equity capital and long-term fixed rate debt - which was of little advantage in the \"lower forever\" environment. And while past periods of significant tightening were remembered as those of distress, they can rightfully also be remembered as periods of a significant revolution and rebirth that spanned many of the public REITs that exist today. The S&L Crisis of the late 1980s - which resulted in the failure of nearly a third of community banks and resulted in significantly constrained access to debt capital - spawned the dawn of the 'Modern REIT Era.' A second wave of REIT IPOs followed in the aftermath of 9/11 and again after the Great Financial Crisis as the limited access to (and high cost of) debt capital, combined with a lift in equity market valuations of public REITs - pushed otherwise distressed highly-levered private portfolios into the public equity markets, a theme that we could very well see repeat over the coming quarters. Hoya Capital Deeper Dive: REIT Balance Sheets The ability to avoid \"forced\" capital raising events has been the cornerstone of REIT balance sheet management since the GFC - a time in which many REITs were forced to raise equity through secondary offerings at \"firesale\" valuations just to keep the lights on, resulting in substantial shareholder dilution which ultimately led to a \"lost decade\" for REITs. While REITs entered this tightening period on very solid footing with deeper access to capital, the same can't necessarily be said about many private market players that rely on the short-term borrowing or continuous equity inflows to keep the wheels spinning. Much the opposite of their role during the Great Financial Crisis, many well-capitalized REITs are equipped to \"play offense\" and take advantage of compelling acquisition opportunities if we do indeed see further distress in private markets from higher rates and tighter credit conditions. Hoya Capital Even as benchmark interest rates doubled from a year earlier and even with market values of REITs lower by 20-30% during that time, REITs balance sheets remain healthy by historical standards, merely giving back the incremental pandemic-era improvement. Debt as a percent of Enterprise Value still accounts for less than 35% of the REITs' capital stack, down from an average of roughly 45% in the pre-recession period - and substantially below the 60-80% Loan-to-Value ratios that are typical in the private commercial real estate space. Interest coverage ratios (calculated by dividing EBITDA over interest expense) have seen a shaper erosion over the past several quarters from its all-time highs set last year, however, but still stand at 4.5x, which roughly matches the coverage ratio at the end of 2019 and compares very favorably to the 2.75x average in the three years before the GFC period. Hoya Capital That said - not all REITs are created equal, and the broad-based sector average does mask some of the intensifying issues in several of the more at-risk sectors and among REITs that have been more aggressive in their balance sheet management. A handful of small and mid-cap REITs - some of which would be considered as having a rather strong balance sheet relative to similar private equity portfolios - have incurred significant charges to \"fix\" their floating rate debt exposure, while others have continued to roll the dice by maintaining a sizable chunk of variable rate debt. The BofA BBB US Corporate Index Effective Yield - a proxy for the incremental cost of real estate debt capital - has surged from as low as 2.20% in late 2021 to as high as 6.67% at the October 2023 peak and now sits at 5.60%. On a percentage basis, this represents a nearly 200% increase in interest costs on variable rate debt. The cost of equity - which we compute based on average FFO yields - is now 7.4% for the average REIT, up from a low of 4.4% in late 2021. Hoya Capital Deeper Dive: REIT Fundamentals As noted, the pockets of distress are almost entirely debt-driven - and further isolated to the office sector - as nearly every property sector reported \"same-store\" property-level income above pre-pandemic levels. REIT company-level metrics have tracked this rebound in property-level performance relatively closely throughout the pandemic - with the exception of the highly-levered REITs that expect sharp FFO declines this year even as property-level cash flows continue to increase. REIT FFO (\"Funds From Operations\") has fully recovered the sharp declines from early in the pandemic and in the first quarter, FFO was 20% above its 4Q19 pre-pandemic level on an absolute basis, and roughly 10% above pre-pandemic levels on a per-share basis. On a year-over-year basis, FFO/share was up 1.5% in Q1. Same-store Net Operating Income (\"NOI\"), meanwhile, was roughly 3.1% higher on a year-over-year basis in the first quarter, and 13% above the pre-pandemic level. Hoya Capital Powered by more than 120 REIT dividend hikes in both 2021 and 2022 - and another 80 dividend hikes in 2023 - dividends per share have finally fully recovered from the wave of pandemic-era dividend cuts in 2020. In 2024, we've tracked 45 dividend increases, while 9 REITs have reduced their dividends. With FFO growth significantly outpacing dividend growth since the start of the pandemic, REIT dividend payout ratios remained at around 70% in Q1 on a trailing twelve month basis - well below the 20-year average of around 80%. With a relatively low dividend payout ratio, the average REIT has built up a buffer to protect current payout levels if macroeconomic conditions take an unfavorable turn. As always, the sector average does mask some elevated payout ratios across several sectors: Mortgage REITs currently pay out about 95-100% of EPS, on average, while Cannabis REIT payout ratios are also elevated. Other higher-risk sectors have built up a decent buffer, as office REITs pay just 70% of FFO while hotel REITs pay less than 40%. Hoya Capital After recording the largest year-over-year decline on record in 2020 which dragged the sector-wide occupancy rate to 89.8%, REIT occupancy rates have rebounded since mid-2020 back to 93.2% - towards the upper-end of its 20-year average. By comparison, occupancy levels dipped as low as 88% during the Financial Crisis and took three years to recover back above 90%. Residential REITs have continued to report near-record-high occupancy rates in recent quarters - despite record-levels of multifamily supply growth - while retail REITs noted a solid sequential improvement as the \"retail apocalypse\" trends subside. Industrial REITs, meanwhile, reported a moderation in occupancy rates to around 96% in Q1 from their record-highs of nearly 98% in late 2022. Office REIT occupancy, however, has seen substantial declines since the start of 2020 and remained 400 basis points below pre-pandemic levels at 87.7% in the first quarter. Hoya Capital Deeper Dive: REIT Valuations & Growth The extended sell-off from late-2021 through mid-2023 - combined with the nearly 20% increase in FFO during this time - has pulled REIT valuations to the lowest level since the end of the Great Financial Crisis. Equity REITs currently trade at an average forward Price/FFO multiple of around 15x using a market-cap weighted average. The market-cap-weighted average, however, is somewhat distorted by the massive weight of richly-valued technology REITs, and on an equal-weight basis, REITs trade at a 13x median P/FFO multiple, which is near the lowest levels since the early 2000s. The average REIT also trades at an estimated 10-20% discount to its Net Asset Value, as implied by current private market valuations. Equity REITs pay a dividend yield of 3.9% on a market-cap-weighted basis, but this dividend yield climbs to over 5.7% on an equal-weight basis, and roughly 8.5% when including mortgage REITs. Hoya Capital Equity valuations can and do play an important role in the ability of REITs to grow accretively, given the usage of secondary equity offerings to fund major acquisitions. So naturally, REITs have \"hunkered down\" in recent quarters as stock price valuations remain low by historical standards and in relation to private market-implied valuations. The \"hunkering down\" has resulted in a limited need for incremental capital. S&P reported this month that REIT capital-raising activity has been 18% below 2023-levels thus far in 2024 and 50% below the peak levels seen in 2021. Through the first four months of 2024, REITs have raised $22B in capital through equity and debt offerings. The majority of the capital raised over the last two years has been through debt offerings, which have accounted for roughly 65% of the total capital raised this year - above the historical average of around 50%. The largest common equity offering of 2024 was American Healthcare' (AHR) $773M IPO. Hotel REIT Ryman Hospitality (RHP) is responsible for the largest debt offering via its $1.0B unsecured debt offering in March. For cumulative totals, industrial REIT Prologis (PLD) has raised the most overall capital this year at $2.9B, followed by cell tower REIT American Tower (AMT) at $1.30 billion. Hoya Capital REIT external growth comes in two forms – buying and building. Acquisitions have historically been a key component of FFO/share growth, accounting for more than half of the REIT sector's FFO growth over the past three decades, with the balance coming from \"organic\" same-store growth and through ground-up development and redevelopment. With a historically large \"bid-ask\" spread for private real estate assets, REITs have slowed their acquisitions over the past several quarters with gross purchases of only $700M in Q1 - the lowest since Q4 of 2018 - but as noted above, we believe that opportunities should emerge if debt markets remain tight if and when public REIT stock prices rebound. Hoya Capital Nearly all of the M&A activity since the start of 2023 has been through the dozen REIT-to-REIT mergers discussed above. At the property-sector level, storage, net lease, industrial, and casino REITs have been far-and-away the most active acquirers of private market assets in recent quarters - accounting for more than half of total net purchases across the REIT industry - with some taking a surprising \"business as usual\" approach to external growth despite the shifting interest rate environment. We noted in our Earnings Recap that net lease REITs reported an average increase in acquisition cap rates of only around 150 basis points between Q4 2021 and Q1 2024, during which time the benchmark 10-Year Treasury Yield increased by over 200 basis points. Most other REIT sectors have been more reluctant to \"hit the bid\" on slow-to-adjust private market valuations. Data Centers and Office REITs have been the most significant \"net sellers\" over the past year.   Hoya Capital REITs have become some of the most active builders in the country over the past decade and - despite the pressure from higher rates - REITs expanded their pipeline in 2023 to levels that exceeded the prior record set just before the pandemic, but new groundbreaking have been few-and-far-between over the past quarter given the unfavorable rate environment. Much of this expansion has been fueled by three property sectors - data center, industrial, and self-storage - which have expanded their pipelines by 80%, 28%, and 17%, respectively, since the end of 2019 - and some of this inflated pipeline is the result of higher construction costs and lingering supply chain delays that prolong the development timeline. Retail REITs, on the other hand, have engaged in minimal development activity over the past several years - which has fueled the recent occupancy increases - while the pipeline in office has also pulled back materially over the last several quarters, as expected. Hoya Capital Takeaways: The Wait At The Bottom Continues REITweek, the annual REIT industry conference, was held this week in New York City. Humbled by two years of rate-driven headwinds, the venue halls were as quiet as any REITweek. Excitement was muted after numerous \"false starts\" on the long-awaited Fed pivot, a dearth of IPO and M&A activity, and a two-year period of significant underperformance versus the broader market. It can only get better: since the start of the Fed's rate hike cycle in March 2022, the REIT Index has underperformed the S&P 500 by a whopping 40 percentage-points. Tempered optimism was the prevailing sentiment among REIT executives. Most discussed steady-to-strong property-level fundamentals, but also an uptick in debt-driven distress among some of their private market peers. \"Delay and pray\" has remained the strategy for many highly-levered property owners amid a dearth of buying interest and limited capital availability. Public REITs have opted to remain on the sidelines, but we expect opportunities to emerge as private markets bottom-out in the coming months. Hoya Capital For an in-depth analysis of all real estate sectors, check out all of our quarterly reports: Apartments, Homebuilders, Manufactured Housing, Student Housing, Single-Family Rentals, Cell Towers, Casinos, Industrial, Data Center, Malls, Healthcare, Net Lease, Shopping Centers, Hotels, Billboards, Office, Farmland, Storage, Timber, Mortgage, and Cannabis. Disclosure: Hoya Capital Real Estate advises two Exchange-Traded Funds listed on the NYSE. In addition to any long positions listed below, Hoya Capital is long all components in the Hoya Capital Housing 100 Index and in the Hoya Capital High Dividend Yield Index. Index definitions and a complete list of holdings are available on our website. Hoya Capital  Editor's Note: This article discusses one or more securities that do not trade on a major U.S. exchange. 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