Deutsche Bank analyst Derek Johnston downgraded AvalonBay (AVB), Boston Properties (BXP), Invitation Homes (INVH), Independence Realty Trust (IRT), RPT Realty (RPT) and SL Green Realty (SLG) to Hold from Buy. The analyst recommends a cautious real estate investment trust positioning into 2023. Stock selection is crucial, says Johnston, who expects "largely muted" public REIT earnings power. The "robust" 2021 and 2022 leasing momentum and "sturdy to positive" rent spreads will wane in 2023 given the macro backdrop, Johnston tells investors in a research note. The analyst says elevated cost of capital for the REITs paired with a likely recession will stall business decision making and weigh on demand and earnings growth.
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Published first on TheFly
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