After hitting record highs in 2021, U.S. stock indexes briefly slipped into correction territory on Monday, showcasing investor concern ahead of the Federal Reserve's first policy meeting of the year.

Real estate investment trusts, facing losses of their own, are not immune.

A number of U.S. REIT stocks have suffered losses exceeding 10% in the past month, as the prospect of rising interest rates and ballooning inflation rattles investors.

"Investors are resetting their expectations for the value of everything that's tied to interest rates," Green Street Managing Director Dave Bragg told Bisnow Monday.

REITs have underperformed so far this year, but not by a meaningful amount, Bragg said. Even so, investors now have a "case of whiplash" because of the recent gyrations.

REITs seeing double-digit monthly share price drops include Alexandria Real Estate Equities, down 11.3%, American Tower, down 13.1%, and Equinix, down 12.5%, all as of Monday. Other major REITs have dropped for the month as well, though not quite as much, such as Prologis, down 7.6%, and Simon Property Group, down 7.8%.

Over the past month, the seven FTSE indexes that involve REITs dropped at least 4%. NAREIT Equity REITs Index, for example, fell 5.3%, while FTSE Nareit Real Estate 50 was down 5.6%.

For now, those losses are mirroring declines in broader equity indexes. The S&P 500 plummeted 10% below its Jan. 3 record, signaling a correction; the last time the index was in a correction was in March 2020. The Nasdaq, meanwhile, crossed the correction threshold last week and is now 13.7% off its high.

Though the market bounced back by the end of the trading day, the volatility serves as a sign of investor concern amid rising interest rates.

The drops seen in the REIT sector come after strong gains experienced in 2021, with the FTSE Nareit All Equity REITs surging 24.5%, for example, while the broader S&P 500 was up 14.4% during that time frame.

Since the start of the year, however, markets have seen losses as investors grow wary over increases in short-term interest rates this year, Nareit Executive Vice President of Research and Investor Outreach John Worth told Bisnow in an email on Monday.

The Fed will kick off a two-day policy meeting on Tuesday, concluding as always with a policy statement and subsequent press conference. Futures markets expect the central bank to keep interest rates near zero this time, according to CME FedWatch, with a hike in March much more certain.

Despite the fluctuations in share prices, real estate can still serve as a guard against inflation concerns, Noyack Capital Managing Principal C.J. Follini said.

"The average standard deviation in real estate and private equity are much lower than the stock market, and real estate specifically will shield investors from the volatility relating to uncertainty about future inflation," Follini said.

Worth points out that there is data to support the idea that REITs' longer-term performance has historically been resilient to increasing interest rates, and that REITs have prepared themselves at least to some degree for a rising interest rate environment.

Notably, he said, REITs have shown positive returns in the majority of 12-month periods of rising 10-year Treasury rates between 1992 and 2021.

According to Nareit data, REITs tend to do well in high-inflation years with a 7% annual rate or more. On average, REITs outperformed the S&P 500 by 5.6 percentage points during those years.

Last year, during the most recent such high-inflation year — the highest in three decades — REITs outperformed the S&P 500 by 12.6 percentage points, with an annual return of 41.3% compared to 28.7% for the S&P 500.

Not necessarily all REIT stocks do well in an environment of rising interest rates, however.

"During periods when interest rates are going up, performance can vary across property sectors," Bragg said. "What we have found historically is that sectors with shorter lease lives have done better."

These include, for instance, the hotel industry, where "leases" are one night, and self-storage, where the term tends to be 30 days, Bragg said. Faring less well are apartments, with their yearlong leases, and assets with multiyear leases.

Whatever the short-term volatility in the market, investors should look for real estate that supports services that are demand-inelastic, Follini said.

"For example, dry warehouses and cold-storage facilities are mission-critical, but hospitality is not because [it represents] discretionary purchases for the most part," Follini said. "Healthcare real estate is mission-critical, retail real estate is not."