Do REITs trade at a discount to NAV?

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The median premium of REITs to their Net Asset Value (NAV) in the United States varied significantly between 2019 and 2024, depending on the property type. This trend was influenced by multiple factors, including market conditions, investor sentiment, and the economic outlook.

By February 2024, a notable shift had occurred in the REITs market. Many REITs, regardless of their property type, were trading at a discount to their NAV. This indicated that investors were valuing these companies at less than the sum of their assets minus liabilities.

The reason behind this discount could be attributed to various market dynamics. For instance, rising interest rates might have increased the cost of capital for REITs, making them less attractive to investors. Additionally, concerns about the real estate market's health might have also contributed to the discount.

Among the various REITs, some property types were more affected by this discount than others. For example, retail REITs might have faced challenges due to the rise of e-commerce, while industrial REITs might have benefited from the increasing demand for warehouse space.