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REITs likely to see slowdown amid changing economy but positive growth still expected

Revenue growth for U.S. REITs is likely to slow over the next two years because of inflation and rising interest rates, say Standard & Poor’s Financial Services LLC analysts.

Michael Souers, director at S&P and a lead analyst in the real estate sector, said while he expects REIT performance to slow a bit, S&P is still forecasting positive growth for the sector. If a recession does take hold, which S&P’s economist recently gave a 30% chance of happening within the next year, how REITs performed during the global financial crisis of the late 2000s may give clues about what’s ahead.

Most REITs posted single-digit percentage slowdown in 2007 and 2008, Souers said, with office-heavy REITs the most impacted. Because of the Covid-19 pandemic, which shook up all commercial real estate sectors to some extent, it’s possible REITs are actually better positioned to withstand a downturn now, because tenant quality has likely improved since the pandemic in sectors like office and retail.

*Article courtesy of Philadelphia Business Journal

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