• U.S. equity markets advanced for a fourth-straight session ahead of a critical week of inflation data which investors are hoping will show a second month of moderating price pressures.
• Following gains of 3.6% last week, the S&P 500 advanced another 1.1% today - its best four-day gains since June - while the tech-heavy Nasdaq 100 gained 1.2%.
• Real estate equities were also broadly higher today following a strong week of outperformance. Led by hotel REITs, the Equity REIT Index advanced 1.0% today with 16-of-18 property sectors higher.
• The long-awaited return to the office? Recent ridership data from the New York MTA - which has historically correlated with office utilization data - indicates that many workers appear to indeed be returning to the office after the Labor Day holiday.
• The US Dollar Index pulled back from two-decade highs while Crude Oil prices advanced 2% on reports that Ukraine has launched a counteroffensive against Russian forces in the region alongside an appeal for additional military support from the U.S. and Western allies.

Real Estate Daily Recap

U.S. equity markets advanced for a fourth-straight session ahead of a critical week of inflation data which investors expect will show a second month of moderating price pressures amid a slowdown in global economic growth. Following gains of 3.6% last week, the S&P 500 advanced another 1.1% today - its best four-day gains since June - while the tech-heavy Nasdaq 100 gained 1.2%. Real estate equities were also broadly higher today following a similarly strong week of outperformance. Led by hotel REITs, the Equity REIT Index advanced 1.0% today with 16-of-18 property sectors in positive territory while the Mortgage REIT Index climbed 0.8%.

After notching its second highest end-of-week closing level since 2007, the 10-Year Treasury Yield ticked higher by another 4 basis points today to close at 3.36%. The US Dollar Index pulled back from two-decade highs while Crude Oil prices advanced 2% on reports that Ukraine has launched a counteroffensive against Russian forces in the region alongside an appeal for additional military support from the U.S. and Western allies. All eleven GICS equity sectors finished higher today with tech-giant Apple (AAPL) among the upside standout on reports of strong pre-order demand for the new iPhone.

Inflation data highlight a busy week of economic data in the week ahead of the Fed's September meeting in the following week. On Tuesday, the BLS will report the Consumer Price Index which investors - and the Fed - are hoping to show that the fastest pace of year-over-year increases is finally behind us. The headline CPI is expected to decline on a month-over-month basis for a second-straight month, pulling the annual increase back down to 8.1% from the four-decade-high set in June as the effects of declining gasoline prices filter into the data. Gas prices have declined about 26% since their peak on June 13th at over $5 per gallon nationally. The following day we'll see the Producer Price Index for August which is expected to exhibit similar trends of peaking price pressures. On Friday, we'll get our first look at Michigan Consumer Sentiment for September. The Fed is particularly interested in the 5-Year Inflation Expectations survey, looking for signs of a potential "wage-price inflation spiral" through elevated consumer wage expectations.

Real Estate Daily Recap

Best & Worst Performance Today Across the REIT Sector

Office: The long-awaited 'Return to the Office?' Recent ridership data from the New York MTA - which has historically correlated with office utilization data from Kastle and others - indicates that many workers appear to indeed be returning to the office after the Labor Day holiday. The 10-Day average ridership on NYC's Rail system increased to its highest level since the pandemic at nearly 80% by the end of last week. NYC-focused REIT SL Green (SLG) advanced nearly 2% today after announcing a pair of transactions. Following a long-running dispute with Chinese-based HNA Group, SLG will fully acquire 45 Park Avenue - a 1.8M-square-foot, 44-story, Class A office property near Grand Central Station and plans to redevelop the property. SLG also announced that it will sell 414,317 SF of space it owns at 885 Third Avenue, better known as “The Lipstick Building” to Memorial Sloan Kettering Cancer Center for $300.4M and will retain the remaining 219k SF.

Hotels: Hersha Hospitality (HT) advanced 1% after it reached a deal to sell two of its West Coast properties - Hotel Milo Santa Barbara and Pan Pacific Seattle - for gross proceeds of $125MM, or approximately $455,000 per key and intends to use the proceeds from the sale to pay down approximately $45M of debt. Leisure and hospitality-focused REITs have been among the better-performing sectors over the past month amid encouraging high-frequency data with TSA Checkpoint data showing a strong end-of-summer swell in travel demand that saw throughput exceed 100% of pre-pandemic levels for the first time since March 2020. Meanwhile, STR reported that U.S. hotel Revenue Per Available Room ("RevPAR") was 24.6% above 2019-levels in the Labor Day week as Occupancy Rates improved to 103% of 2019-levels while Average Daily Rates were 20.9% above the pre-pandemic average.

Single-Family Rentals: Last Friday, we published Single Family Rental REITs: Renting the American Dream. One of the best-performing property sectors over the past quarter, SFR REITs have been beneficiaries of surging mortgage rates, which has made renting single-family homes a relative bargain. Single-family rents rose at the fastest pace on record through mid-2022, an elevated pace that has staying-power given the significant 'embedded' rent growth resulting from below-market renewal offers as SFR REITs have "throttled" rent hikes on existing tenants. Cooling home price appreciation and tightening credit conditions have prompted many smaller SFR investors to pull back, providing a more favorable external growth environment for the three SFR REITs - American Homes (AMH), Invitation Homes (INVH), and Tricon Residential (TCN).

Mortgage REIT Daily Recap

Per the REIT Rankings Tracker available to Income Builder subscribers, mortgage REITs were mostly-higher today with residential mREITs advancing 0.3% while commercial mREITs rallied 1.7%. On a slow day of mREIT newsflow, Brightspire Capital (BRSP) and TPG Real Estate (TRTX) were the upside standouts while Armour Residential (ARR) and Lument Finance (LFT) lagged. After the close today, Orchid Island (ORC) confirmed its new post-reverse-split monthly dividend rate of $0.16/share - one of six REITs that has reduced its dividend this year compare to 105 REIT dividend hikes.

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