Airbnb IPO • Inflation Steady • Jobless Claims Rise

Summary

• U.S. equity markets finished mixed Thursday as concerns over a sharp rise in initial jobless claims were partially offset by vaccine-driven optimism, underscored by the IPO of home rental firm Airbnb.
• Now lower by 0.8% on the week, the S&P 500 finished fractionally lower today but the tech-heavy Nasdaq 100 gained 0.4%. The Small-Cap and Mid-Cap indexes finished higher as well.
• Real estate equities were mostly lower on the day as the broad-based Equity REIT ETF (VNQ) declined by 0.4% today with 11 of the 18 property sectors in negative territory.
• Vaccine optimism offset concerning employment data as Initial Jobless Claims rose to the highest weekly rate since September amid an ongoing intensification of the coronavirus outbreak.
• Airbnb (ABNB) more-than-doubled in its market debut today, ending the day with a market capitalization of over $100 billion dollars, valued roughly on-par with the combined valuation of Marriott, Hilton, Hyatt, and each of the eighteen hotel REITs put together.

Real Estate Daily Recap

U.S. equity markets finished mixed Thursday as concerns over a sharp rise in initial jobless claims were partially offset by vaccine-driven optimism, underscored by the booming IPO of home rental firm Airbnb (ABNB). Now lower by 0.8% on the week, the S&P 500 ETF (SPY) finished fractionally lower today but the tech-heavy Nasdaq 100 ETF (QQQ) gained 0.4%. Real estate equities were mostly lower on the day as the broad-based Equity REIT ETF (VNQ) declined by 0.4% today with 11 of the 18 property sectors in negative territory. The Mortgage REIT ETF (REM) declined 0.4% on the day.

All eyes are now on the FDA as the first vaccine approval in the United States is reportedly "imminent" following the review of Pfizer's (PFE) vaccine candidate today. Vaccine optimism offset concerning employment data as Initial Jobless Claims rose to the highest weekly rate since September amid an ongoing intensification of the coronavirus outbreak. 7 of the 11 GICS equity sectors finished on the downside today with the Industrials (XLI) and Materials (XLB) sectors dragging on the downside, but a jump in oil prices lifted the Energy (XLE) sector to gains on the day. The Small-Cap (SLY) and Mid-Cap (MDY) indexes also rallied on the day to close at fresh record-highs.

After closing at post-pandemic highs earlier in the week, the 10-Year Treasury Yield (IEF) pulled back 3 basis points today following disappointing jobless claims data even as inflation data came in slightly hotter than expected. The BLS reported this morning that the Core Consumer Price Index (CPI) rose 0.2% in November from the prior month, pushing the annual increase to 1.62%. The headline CPI index also recorded a 0.2% increase in November and is now higher by 1.20% over the past year. Inflation expectations have been rising, however, with several key inflation expectation metrics rising to the highest level since at least mid-2019.

Commercial Equity REITs

Today, we published Data Center REITs: Cloud Correction on The REIT Forum. Data Center REITs - the best-performing property sector of 2020 - have stumbled over the last quarter as lukewarm earnings results and intense competition have clouded the outlook for 2021. Leasing activity - the most closely-watched earnings metric - disappointed in Q3, pulling back from the record-highs. Even so, all five data center REITs boosted full-year FFO guidance. The Cloud Is Getting Crowded. Risks remain as intense competition from the hyperscale giants – Amazon, Microsoft, and Google - and relentless supply growth have pressured pricing power and AFFO growth.

Home rental firm Airbnb (ABNB) more-than-doubled in its market debut today, ending the day with a market capitalization of over $100 billion dollars, a value roughly on par with the combined valuation of Marriott (MAR) - $42B, Hilton (HLT) - $30B, Hyatt (H) - $7B, and each of the eighteen hotel REITs - $34B - put together. As discussed in Hotel REITs: Winter's Coming, hotel REITs - along with the global leisure and tourism industry - have been decimated by the coronavirus pandemic. Following a record year for the industry in 2019, hotel REITs reported occupancy rates below 20% in Q2. Occupancy has recovered to roughly 45% by late summer, but has stalled in recent months as the pandemic has reaccelerated.

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