Ratings agency Fitch has lowered its 2009 outlook for some sectors of the US REIT market from stable to negative as property companies battle with recession, softening property fundamentals and weakened liquidity.
Fitch said that stock prices are, on average, about 60% below their peak level from February last year, which could make it more difficult to cover their near-team bond payments.
Steven Marks, managing director and head of the US REIT group at Fitch, said, ‘REITs are in a difficult debt refinancing environment that will lead to worsening fixed charge coverage ratios, more challenged liquidity profiles and softening unencumbered asset coverage metrics.’
Fitch added that its outlook for the US office sector is negative next year and projects unemployment to reach 8.3% by late 2009.
The industrial sector, which will be hit by declining demand for shipping goods and weaker consumer spending, will also suffer next year.
Its outlook for malls and shopping centres is also negative, and Fitch expects consumer spending to fall by 1.6% next year, remaining low in 2010. Store closings are likely to increase substantially during the first half of 2009, affecting retail landlords, it said.
However Fitch retained stable ratings for the multifamily and health care sectors because many of the apartment REITs had taken steps to prefund debt maturities through next year and 2010.