According to industry group Nareit, REITs are well-positioned to navigate economic and market uncertainty in 2023 due to strong operational performance and balance sheets. As part of their 2023 REIT Outlook, the firm wrote, “despite economic headwinds and weakness in valuations, equity REITs have proven to be quite resilient from an operational perspective, and it is clear that REITs are well-positioned for ongoing economic uncertainty in 2023.” The firm noted that data from the Nareit T-Tracker in the third quarter of 2022 highlighted solid year-over-year growth in funds from operations (FFO), net operating income (NOI), and same-store NOI. Quarterly FFO increased to $19.9 billion in the third quarter, a 14.9% increase from a year ago and an all-time high. While the pandemic took a toll on the operational performance of equity REITs, there’s no question that it has recovered and surpassed pre-pandemic levels. Nareit also noted how REITs historically perform during and after a recession. For example, REITs have historically outperformed private real estate during a recession and in the four quarters after a recession. REITs have also historically outperformed their equity market counterpart before, during, and after recessions.
Finsum:Based on Nareit's 2023 outlook, REITs are well-positioned to navigate market uncertainty and a potential recession due to strong operational performance.