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