REITs (e.g., VNQ) have underperformed the broad market (S&P 500) by over 20% since early July of last year, thanks at least in part to concerns that e-commerce (e.g., Amazon) has rendered shopping malls obsolete. To illustrate this point, one REIT, SPG (Simon Property Group, the largest shopping mall and retail center owner in the country), has underperformed the broad market by over 40% since the end of last July. The graph above illustrates the divergences:
According to the latest data (April) from CoStar, prices for larger commercial real estate properties slumped beginning in mid-summer last year, but have rebounded of late. Meanwhile, their equal-weighted property price index (which captures the much larger volume of transactions for smaller properties) jumped an impressive 15% in the year ending last April, and has been posting double-digit gains for the past four years:
I point this out because the pessimism priced into REITs in general, and especially those that specialize in large commercial properties and shopping malls, may have reached extreme levels. Caveat emptor, of course.