Commercial real estate REITs have been under intense pressure as the industry faces a tripple whammy of high-interest rates, work-from-home, and white-collar layoffs. On Wednesday, the Fed decided to hike interest rates by 0.25% and signaled that more rate hikes were coming.

And recent data shows that the percentage of people working from home is still sharply higher than where it was during the pandemic. Worse, many large companies like Amazon, Salesforce, and Meta Platforms are laying off thousands of employees. 

Therefore, with debt maturities coming up, there are concerns that the industry will be in trouble for a while. Further, as I wrote in this article on the SCHD ETF, REITs are now competing with cash, with short-term bonds yielding over 5%. So, these are some of the top commercial real estate REITs to avoid during the sell-off. 

Boston Properties 

Boston Properties (NYSE: BXP) stock price has been in a strong sell-off in the past few months. It is trading at $49.63, which is about 63% below the highest level in 2022. This decline is mostly because of the cities where the company operates. 

It is mostly concentrated in places like New York, Los Angeles, San Francisco, and Seattle. These are some of the most troubled cities in the commercial real estate industry. In the most recent earnings statement, the company’s CEO said:

“Many of our clients are experiencing a slowdown in growth or reductions in top line revenue and as a result are focused on cost control including moderating headcount and space use.”

Therefore, in the near term, I suspect that the Boston Properties stock price will continue falling as investors embrace the new normal of high interest rates. In the long term, investors will likely buy the dip as the dividend yield become more attractive.

Kilroy Realty Corporation

Kilroy Realty Corporation’s (NYSE: KRC) stock price has also been in a freefall. It was trading at $29 on Wednesday, sharply lower than its 2022 high of $79. As a result, its forward dividend yield to 7%. 

The stock’s collapse is mostly because of the triple whammy facing the industry and the fact that billions of dollars are coming due. And like Boston Properties, the company’s operations are concentrated in high-risk cities like San Francisco, Seattle, and Austin. 

The only benefit for Kilroy is that it has staggered debt maturities, which meaning that it has more room to adjust its books. As a result, it has no debt maturities until December 2024, as the CEO noted:

“Net debt the fourth quarter annualized EBITDA remains about six times. And we have no debt maturities until December of 2024 and limited interest rate exposure with all of our debt fixed or subject to cap.”

Vordano Realty Trust

Vornado Realty Trust (NYSE: VNO) stock price has dropped lower than most commercial real estate trust stocks. It was trading at $13.80, down by over 72% from the highest point in 2022. This performance is mostly because Vornado is highly concentrated in New York, where occupancy rate remains low. 

Like Kilroy, Vornado has no maturities this year, with the next one coming in mid-2024. Still, because of its focus on New York, Vornado stock will likely continue falling in the near term. The other commercial REIT stock we recently recommended exiting was SL Green. It stock is down by over 10% since the article went live.

The post Top 3 commercial real estate REITs to avoid amid a triple whammy appeared first on Invezz.

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Data from Point2Homes shows that homes sell for less than 75% of the listed condos in Detroit.

The “condo or home?” question has been causing debates and sometimes even fights for many generations. While some talk of the land and value one can get by going farther out, others will not give up their small nook in an exciting city for acres of land anywhere else.

When the location is the same, the logic of “more space will cost you more” is generally the standard — a larger house with a yard will logically cost more than a one-bedroom apartment.

DON’T MISS: 10 Places With Affordable Homes Where You'd Actually Want to Live

But according to numbers crunched by real estate platform Point2Homes, this tendency breaks in a number of U.S. cities. Houses sell for less than 75% of the listed condos in Detroit, 39% of listings in Ohio’s Akron and 36% of the listings in Cleveland.

You Can Buy Four Homes For The Price Of One Condo In This City

The reasons have to do with the fact that, in certain cities, single-family homes are generally older and more dilapidated than the condo towers built in the last decade.

Other cities where homes are generally cheaper than condos include Chicago, Pittsburgh and Jersey City.

“The biggest price difference is in Detroit, where a single-family home is $171,000 cheaper than a condo — although some houses here might need extra TLC,” write the report’s authors. “This cost difference means one could almost buy four detached homes for the median price of one condo.”

One city across the U.S. came out exactly tit for tat — in New York’s Rochester, the median price is $183,000 for both an apartment and a single-family home. 

Meanwhile, Washington’s Belleville and Killeen in Texas are the cities where homes are significantly more expensive — the former, which is a high-end suburb popular among high-earning Amazon  (AMZN) - Get Free Report workers from Seattle, commands a median $1.525 million for a home.

A condo, meanwhile, will only set one back $535,000.

This Is How Long It Takes Buyers With A Typical Income To Upsize

Point2Homes further broke down how long it would take people with a typical income to upsize from a condo to a house. In Rhode Island’s Providence, the difference between $334,000 and $331,000 would only take someone earning the median $60,970 a month’s salary to achieve.

This is significantly less feasible in Honolulu, which has seen an influx of high-earning professionals come in during the pandemic. With an average price of $1,198,000, a median home is 164% more expensive than a condo and would take a household earning a median income more than 10 years to close.

“Back on the mainland, California sets itself apart with the most cities where matching the upsizing price difference would take quite some time,” write the report’s authors. “Perhaps surprisingly, it would be easier in Los Angeles and Long Beach than in Irvine and Glendale, both secondary cities within the Los Angeles-Long Beach-Anaheim metro.”

Cities where the gap is easiest to close include Kansas City as well as Virginia’s Norfolk and New York’s Buffalo — in the latter, the difference is between $198,000 for a house and $188,000 for a condo.

“Cities where the gap is easiest to close include Kansas City as well as Virginia’s Norfolk and New York’s Buffalo,” writes the report.

SEE THE FULL HOME-CONDO COMPARISON HERE.

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