REIT Liquidity Should Withstand Short-Term Market Shocks
These companies are financially prepared and armed with lessons from the last downturn, says Alice Chung of Moody’s.
May 6, 2020 | Alice Chung | Commercial Property Executive
According to Moody’s, most U.S. rated real estate investment trusts probably have the financial wherewithal to persevere through the economic shocks stemming from the coronavirus.
The coronavirus outbreak and the efforts to slow its spread resulted in unprecedented disruption across many sectors and markets in the U.S. The precise impact on U.S. REITs is unclear but will largely depend on how long the COVID-19 pandemic persists. If the outbreak lasts for an extended period of time and the economic outlook deteriorates even further, property sectors with shorter lease terms and asset classes already facing other challenges will bear the brunt of the decline in earnings, cash flow and occupancy losses. Specifically, REITs that own and operate retail malls, lodging, senior housing and gaming assets are the most vulnerable and face different risks in varying degrees. The short-term impact for real estate industries directly tied to shopping, consumer sentiment, leisure and travel will be particularly hard.
