Publicly traded US equity real estate investment trusts opened 2023 with a slowdown in median growth of same-store net operating income in the first quarter.

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S&P Global Market Intelligence prefers to take cash-based same-store net operating income, if available. However, a noncash-based net operating income will be used if not.

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The same-store net operating income (NOI) across publicly traded US equity REITs was up a median 5.2% year over year in the first quarter, following a 5.6% median hike in the previous quarter and a 6.1% year-over-year median increase for the whole year of 2022.

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Industrial REITs notched biggest gains

The industrial sector posted the largest year-over-year growth in same-store NOI during the first quarter, with a median gain of 10.1%. Next was the residential segment, with a 9.4% median increase, while self-storage REITs came in third at 8.9%.

Three out of 10 industrial REITs were on the overall list of US REITs with the biggest same-store NOI gains for the first quarter. Cold storage-oriented Americold Realty Trust Inc. had the steepest hike among the three, with a same-store NOI year-over-year gain of 24.6%, which was also the second-highest increase across all US REITs in the first quarter.

In its most recent earnings release on May 4, Americold attributed the growth of same-store NOI to cost of operations and revenue factors, such as rate hikes, the REIT’s pricing initiative and better economic occupancy.

Terreno Realty Corp. and Prologis Inc. were the other two industrial REITs on the top 10 list, reporting same-store NOI hikes of 15.5% and 11.4%, respectively.

Within the residential segment, multifamily-focused Veris Residential Inc. saw the biggest gain, ending the first quarter with a same-store NOI of $36.5 million, a 15.8% increase from the same period in 2022. It was also the fourth-largest hike across all property types during the first quarter. Three other multifamily-focused residential landlords were among the top 10 US REITs with the highest same-store NOI gains in the first quarter: Aimco, Mid-America Apartment Communities Inc. and Apartment Income REIT Corp.

The biggest gainer among all US REITs in the first quarter was healthcare REIT Diversified Healthcare Trust, posting same-store NOI year-over-year growth of 48.1%.

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Regional malls incurred losses

The regional mall segment was the sole property type that reported a median year-over-year decline in its same-store NOI for the first quarter, down 2.9%.

Regional mall operator CBL & Associates Properties Inc. saw a 4.5% year-over-year drop in same-store NOI, the fourth-biggest drop across all US REITs. Macerich Co., another mall landlord, reported a 1.4% annual loss in same store NOI during the same period.

The decline in same-store NOI was anticipated, and while there was an increase in tenant bankruptcy announcements, these were already considered in the REIT's original guidance range, CEO Stephen Lebovitz said in CBL's earnings release.

"Gross rent growth from new leasing was offset by lower percentage rents, an unfavorable variance in uncollectable revenues and higher expenses that were primarily related to completion of previously delayed maintenance projects and timing of certain third-party contract expenses," Lebovitz said.

Office-focused Equity Commonwealth logged the largest same-store NOI year-over-year decline across all property types during the first quarter, down 17.0%.

Weak performers

The office segment had the smallest gains out of the four major property types during the first quarter, with median same-store NOI growth of about 1.4% year over year. It was a slight increase from 1.2% in the previous quarter but a deceleration from the 2.2% median hike for the entirety of 2022.

Meanwhile, retail REITs saw 3.7% median year-over-year growth in the first quarter, slightly down from 3.8% in the fourth quarter and from the 4.4% median increase in the entire year of 2022.

Same-store occupancy across all US REITs was at a median of 93.5% in the first quarter, slightly down from the prior quarter's 93.6%.

The median same-store occupancy rate across all REITs has been above 94% since 2015, but the rate dropped to 93.4% in 2020 amid the COVID-19 pandemic. In 2021, the same-store occupancy rate bounced back to about 94.1% and was at 94.0% in 2022.

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