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Europe's real estate sector outperforms the average
Europe, slightly ahead of the cycle of falling interest rates, saw the STOXX Europe 600 REIT index, which reflects the average performance of the real estate sector, rise by 6% over the last month. This brings its annual gain to 24%, well ahead of the European average of 0.5% for the month and 12% for the year.
As a reminder: lower interest rates make credit more accessible, which stimulates demand for rentals and increases rental income. It also reduces financing costs for real estate companies, who often borrow at variable rates. As a result, a policy of monetary easing is making yields on real estate assets more attractive relative to bonds, encouraging investors to turn more to the sector.
Commercial & Industrial segment
The Commercial & Industrial segment posted an average increase of 3.8% over the month, which is below the sector average. This performance contrasts with its usually superior results, particularly over a one-year period, when it posted an increase of 29% versus 23% for the sector as a whole. French companies Unibail-Rodamco-Westfield SE and Klépierre lead the way, with increases of 12% and 9% respectively. The UK's Land Securities Group rounded off the podium with a 6% rise. At the other end of the spectrum, we find the UK's Tritax Big Box REIT up slightly by 0.6%, Belgium's Warehouses De Pauw SA down 1.5%, and Segro plc down 2%.
Residential segment
The residential segment recorded an estimated average performance of 6.5% over the past month. Finnish property company Kojamo Oyj led the way with a 13% rise, closely followed by Sweden's Fastighets AB Trianon at 12.7% and a trio of German companies: TAG Immobilien at 11%, Vonovia at 10%, and LEG Immobilien at 9%.
The weakest performers were Sweden's Wallenstam AB (up 2%) and Swiss conglomerate Hemnet Group(down 6%).
Office segment
In the office segment, average performance is estimated at 6.3%. British property companies stood out, with British Land Company leading the way at 14% and Derwent London PLC at 8%. Paris-based Gecina performed well at 11%, followed by Madrid-based Merlin Properties Socimi at 6% and Swiss Prime Site AG at 5%.
US REITs back in the spotlight
The US real estate market, represented by the S&P 500 Real Estate index, experienced a reversal of trend in April, emerging from a two-year period of stagnation. In anticipation of a rate cut, the index outperformed the S&P 500 , posting a three-month rise of 17% and a monthly performance of 6%. This renewed momentum could restore the real estate sector's image as a safe-haven investment, in addition to enabling refinancing at lower costs. This is also reflected in higher dividends, with over 38% of US REITs having increased their payouts since January, particularly in the industrial and residential segments, with increases of 66.7% and 58% respectively.
Commercial & Industrial segment
In the US, the commercial & industrial segment recorded an average month-on-month performance of 4.8%. Storage companies such as Public Storage and Extra Space Storage led the way, with increases of 12% and 7% respectively. They are followed by commercial property companies Kimco Realty and Regency Centers, with increases of 5% and 4% respectively.
Residential segment
U.S. residential real estate companies are performing in line with their European counterparts, with an average increase of 6.5%. Colorado-based UDR leads the way with an increase of 9.6%, followed by California's Essex Property Trust at 8.8%, Tennessee's Mid-America Apartment at 7.4%, Illinois' Equity Residential at 7%, and Virginia's AvalonBay Communities at 6.4%.
Office and data center segment
The US office and data center segment posted an average month-on-month performance of 8.8%. Boston Properties, which specializes in office buildings, stood out with a spectacular rise of 17%. It is followed by Digital Realty Trust, which manages data centers, and Alexandria Real Estate Equities, which focuses on office buildings, with performances close to 6.5%. Finally, Equinix, which specializes in data centers and digital infrastructures, posted a 5% increase.
