REIT shares took a tumble last week in the wake of the latest upbeat reading on US jobs, dropping to their lowest level since August.
The Bloomberg REIT Index fell 3.1%, but the biggest losers were healthcare landlords like Ventas Inc, Omega Healthcare Investors and Welltower, Bloomberg reports.
"The market knew the Fed would eventually raise rates and the REIT party could be more sober," BMO Capital Markets Corp analyst John Kim says.
Last month in particular had a great surge in employment. Wage growth improved while the jobless rate fell to a seven-year low of 5%.
The improved job conditions pave the way for the Fed to increase interest rate, in turn increasing the cost of capital for REITs.
"Declining interest rates have been a huge tailwind to asset and REIT prices in recent years," Kim says. "Going forward they will be a headwind." [Bloomberg]
