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Downgrades Flood In For Commercial Real Estate Stocks: Analysts Warn Of ‘Rocky Road Ahead’

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Bank of America has downgraded six players in the Commercial Real Estate (CRE) mortgage REIT sector, citing interest rate headwinds and weakening fundamentals that spell a “rocky road ahead” for the industry.

Eric Dray, CFA, a research analyst at Bank of America, conveyed in a note to clients on Monday that the sector might see a downward trend in book values and sustained tepid investor sentiment over the coming quarters.

“The office sector has faced headwinds from slow return-to-office in the U.S.,” according to Bank of America, as evidenced by a minimal effective rent growth of just 0.5% year-over-year in the fourth quarter of 2023, coupled with a climb in vacancy rates to 19.6%.

Bank of America’s Downgrade Decisions

Several mREITs have been downgraded by BofA, reflecting the anticipation of persistent sectoral pressures:

  • Ares Commercial Real Estate Corp. (NYSE:ACRE): Downgraded to Underperform with a new price objective (PO) of $7, down from $11. Notable concerns include a significant office exposure and looming portfolio maturities, …

Full story available on Benzinga.com

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