For real estate investment trust (REIT) investors, the third consecutive week of decline has hit hard, reflecting the broader downturn in the real estate sector as a whole.

The Federal Reserve left its policy interest rate untouched at 5.25%-5.50% for the fourth consecutive meeting. Clarifying that it does not anticipate reducing the target range until it is more confident in inflation moving sustainably toward 2%.

The recent statement from the Federal Open Market Committee signals a potential resurgence of the ‘higher for longer’ policy, according to Seeking Alpha Analyst, Damir Tokic.

Of the 11 S&P 500 sectors, the real estate sector is among the most sensitive to rate hike decisions. Notably, FTSE Nareit All Equity REITs closed the week 0.75% lower, whereas the Dow Jones Equity All REIT Total Return Index fell by 0.68%.

In particular, the Real Estate Select Sector SPDR ETF, monitoring S&P 500 real estate stocks, dropped by 0.47% week-over-week (W/W) and 4.37% year-to-date (YTD). Meanwhile, the FTSE Nareit Mortgage REITs index plummeted by 4.33% from the previous week.

Notably, the major indices continued to ascend since the start of 2024, with the S&P 500 closing 1.38% higher than the preceding week.

Turning to earnings, REITs presented a mixed bag with Q4 results this week. Alexandria Real Estate Equities (ARE) reported earnings slightly below the Wall Street consensus, although its revenue surpassed expectations. Additionally, Two Harbors Investment (TWO) recorded adjusted earnings affected by market-driven value changes in volatile markets set against a high-interest-rate backdrop.

Conversely, Dynex Capital (DX) boasted strong results, while Equity Residential (EQR) matched the average analyst estimate for their earnings. Furthermore, Boston Properties (BXP) outperformed with above-consensus Q1 2024 guidance for its funds from operations after beating the Q4 FFO consensus.

On the downside, AvalonBay Communities (AVB) projected a Q1 earnings decline from Q4 results, with the midpoint of its full-year core funds from operations guidance falling below the consensus estimate. Equity Lifestyle Properties (ELS), Brandywine Realty Trust (BDN), and Camden Property Trust (CPT) reported results that were largely in-line with expectations.

Looking at subsectors, Office REITs experienced the most significant decline, closing the week 6.18% lower than the prior week. Following closely, Self Storage lagged behind with a drop of 2.95%.

However, amidst the downturn, data centers stood out among the subsectors, posting an impressive gain of 2.88% on average.

Investors can glean insights into the subsector performance for the week in the image below: