It’s been a profitable year to invest in real estate stocks, unless you’re betting on new public names at the intersection of real estate and tech.
Investors betting on veteran public owners at pandemic lows saw substantial returns in 2021, even in hardest hit segments like office, accommodation and retail.
As substandard retail inventories continued to struggle, owners of Class A malls and malls have made a comeback after a devastating year in which many of their properties remained closed. Macerich’s share price rose more than 60% in 2021, while that of Simon Property Group nearly doubled, regaining its pre-pandemic level.
“We have overcome the arbitrary shutdown of our business due to the pandemic and our cash flow has rebounded significantly, which many doubted,” Simon Property Group Chairman and CEO David Simon said at a call for results in November.
Stock performance for office and hotel companies was more subdued, although still strong. Office owners Boston Properties and SL Green, for example, have both seen gains of over 20% this year, while big names in accommodation like Marriott International and Host Hotels have seen gains of 32% and 24%, respectively. At the end of the year, the near-term outlook for both segments is muddled, with the Omicron variant indefinitely delaying any expected “normalcy”.
Industrial and multi-family homeowners – two real estate sectors that have benefited from changes in consumer behavior over the past two years – have continued to shine. Prologis climbed almost 75%, while Duke Realty recorded a gain of almost 70%. Both saw new historic highs.
Multi-family and single-family rental housing owners have benefited from the imbalance of supply and demand in the country’s housing market. Essex Property Trust and AvalonBay Communities on the apartment side, and Invitation Homes and American Homes 4 Rent on the single-family home side, have all seen gains of around 50% or more this year.
The world’s two largest real estate investment managers – Blackstone and Brookfield Asset Management – significantly outperformed the market in 2021. Blackstone’s share price more than doubled during the year, while that of Brookfield gained 54% and closed near an all-time high.
However, not all of the inventories associated with overheating housing and recovering commercial markets have prospered. Compass’s spring IPO was 30% lower than originally targeted, and the brokerage’s shares had lost about half of their value by the end of the year. The company reported a net loss of $ 100 million in the third quarter, as spending skyrocketed and it settled a long-standing dispute with tech entrepreneur Avi Dorfman over his role in founding the brokerage house.
Each of the iBuyers – companies like Zillow and Opendoor that offer algorithm-based instant deals for single-family homes that they renovate and then monetize – have been missed in the stock market this year, with drops of around 40% or more. more. Zillow closed its iBuying business in November, citing the unreliability of its house price forecasting model that caused it to overpay for thousands of homes, causing its inventory to plummet.
Offerpad, another iBuyer that went public via a SPAC merger in September at a valuation of $ 2.7 billion, soared in its early days in the market before coming back to earth. The stock has fallen about 35% since it started trading.
New entrants to the public proptech market were mixed. SmartRent, the smart home automation company that went public through a $ 2.2 billion PSPC merger in August, and Procore, the construction management platform that raised $ 635 million in an IPO in stock market this spring, ended the year lower after a turbulent first month of trading.
Douglas Elliman, the brokerage that began trading on December 30 after the Vector Group split, has put the icing on the cake of a year of turnaround. Elliman’s separation from Vector’s tobacco business should prompt ESG-conscious real estate investors who have wanted to get involved, analysts said. The stock rose more than 21% on its first trading day.