The 10-year is back at 5.01%. Listed REIT funds fell 2%
For the week ended Friday, September 18, Vanguard's VNQ fell 2.0% and the 10-year Treasury yield closed at 5.01%.
The 10-year Treasury yield was already at 5.01% on Wednesday, the day the Federal Reserve raised its overnight target a quarter point to a range of 3.75% to 4%, the first increase since 2023. It fell to 4.94% on Thursday and closed Friday at 5.01%, five basis points above the 4.96% of a week earlier. Vanguard's U.S. real estate fund VNQ, a $70.8 billion portfolio of listed REITs and other U.S. real-estate companies, fell 2.0% to $92.91. That was a second week of declines. Equity REIT funds fell 1.3% through September 11, and VNQ is now down 5.8% over the past month. Schwab's U.S. REIT fund SCHH and State Street's S&P 500 real estate fund XLRE each fell 2.0% for the week.
Nuveen, in a September 14 commentary, had already attributed the climb toward 5% to oil above $100 a barrel and firmer inflation data. State Street, using data as of August 26, put the share of REIT debt that is fixed-rate at about 90%, with an average maturity of about six years. Most of those coupons do not reprice when the overnight rate moves a quarter point. The buildings did not refinance this week. The shares were marked anyway.
Manhattan is leasing. Distressed sales are still clearing cheap.
SL Green, Manhattan's largest office landlord, said Monday it has signed 129 Manhattan office leases this year totaling 1.76 million square feet, at rents 15.8% above the previous fully escalated rents on the same spaces. Nearwater Management took 37,563 square feet at 245 Park Avenue on an eight-year term, bringing that building to 100% leased. The company's leasing pipeline exceeded 1 million square feet. SL Green shares still fell 1.9% for the week, to $52.08.
That split is the private market's version of the same week. Wolf Commercial Real Estate, citing a CoStar analysis published Friday, said deeply discounted sales are becoming more common, with properties changing hands 20% to nearly 100% below prior purchase prices across office, retail, multifamily, hotel and industrial. Trophy space in Manhattan is being re-leased at higher rents. Older buildings in other cities are still being sold at a loss to the last buyer.
Vivmark reaffirmed 2% growth and still fell 6.6%
Vivmark Residential, the 184,000-apartment landlord created when AvalonBay and Equity Residential closed last month, fell 6.6%. It is a 4.9% line in XLRE and a 2.9% line in VNQ.
On Tuesday the company published an operating update for a Bank of America conference the next day. It set a full-year 2026 same-store residential revenue outlook of 2% at the midpoint, matching the July 22 outlooks from AvalonBay and Equity Residential. Physical occupancy was 95.7% as of September 11, and net effective asking rents were up 3.6% year over year. On Wednesday, the first session with both the update and the Fed decision, the shares dropped 4.0%.
Vivmark broke from VNQ on Wednesday
- VMRK · 61.22
- VNQ · 92.91
Welltower, the senior-housing landlord that is the largest holding in both funds, fell 2.9%. Realty Income, the triple-net landlord, fell 4.8% to $56.66, 80 cents above its 52-week low of $55.86, and is down 9.6% over the past month. Digital Realty, the data-center REIT, fell 3.4% on price. Equinix, the largest data-center holding in VNQ, fell 1.6%, and Pacer's data-and-infrastructure real estate fund SRVR fell 2.5%.
It was not a uniform property sale. Prologis, the warehouse landlord and VNQ's second-largest holding, was roughly flat on a total-return basis. Simon Property Group, the mall owner, rose 0.2%. Alexandria Real Estate Equities, the life-science landlord, rose 4.2%. iShares' residential, healthcare and self-storage fund REZ still fell 2.0%, in line with the broad funds, because apartments and healthcare are the sleeve.
Mortgage REIT funds are a rate book
VanEck's mortgage REIT income fund MORT fell 3.4% to $9.03, a cent above its 52-week low of $9.02, and is down 10.1% over the past month. iShares' mortgage real estate fund REM fell 3.5% on a total-return basis; the share price dropped 5.8%, a gap that reflects the $0.5059 quarterly distribution that went ex-dividend on Tuesday. Annaly Capital Management, about 18% of REM and 19% of MORT, fell 3.9%.
These are leveraged portfolios of mortgages and mortgage-backed securities, funded in the repo and agency markets. They wear a property label, but they are a rate vehicle. REM's last four quarterly payments come to a 10.12% trailing yield on Friday's $19.58 price. iShares' U.S. real estate fund IYR, which holds equity REITs, paid $0.738 the same week; its trailing yield on the last four payments is 2.43%.
The week clustered the U.S. equity funds around a 2% decline, and the mortgage funds fell more. U.S. equity-REIT funds remain up in 2026 after the two-week slide. Vanguard's global ex-U.S. real estate fund VNQI does not have that cushion: it is down 5.5% year to date.
The private market is leasing the good buildings dear and selling the others cheap. The listed book that owns them still carries mostly fixed-rate debt that does not mature for years. A week of lower fund prices does not say which of those buildings you own.
Frequently asked
Why did REIT funds fall if the Fed only moved a quarter point?
About 90% of REIT debt is fixed-rate with roughly six-year average maturity, so the coupons didn't reprice: the shares were marked anyway.
Was the selling across the board?
No: Prologis was roughly flat, Simon rose slightly and Alexandria gained 4.2%, while apartments, healthcare and triple-net names led the declines.
Why did Vivmark drop 6.6% after reaffirming its outlook?
It reaffirmed 2% same-store revenue growth with 95.7% occupancy, but the shares fell 4.0% on the session that carried both the update and the Fed decision.
How are the funds doing for the year?
U.S. equity-REIT funds are still up in 2026 after the two-week slide, while the ex-U.S. fund is down 5.5% and mortgage REITs are down 7.1%.