Fitch: REITs May Face Growing Pressure

The real estate investment trust sector may face "increased negative ratings pressure" if current economic problems persist, according to Fitch Ratings.The rating agency has revised its rating outlook for the multifamily sector from stable to negative and maintained a negative rating outlook for the office sector. John Olert, a Fitch managing director, said the actions were prompted by "continued uncertainty on a sustained recovery and the related benefits of rent stabilization and growth." Multifamily REITs have been hurt by a continued supply/demand imbalance caused by high unemployment levels, increased purchases of single-family homes, and rising levels of construction starts and deliveries. While Fitch's rating outlook for industrial REITs remains stable, the rating agency said it believes the earnings growth and the stability of the sector has weakened. And even though Fitch's outlook for the retail sector remains stable as well, the rating agency cautioned that many retailers would have to close underperforming locations if the United States falls into a double-dip recession and consumer confidence erodes further.