OREANDA-NEWS. April 20, 2015. Key macro indicators such as GDP and unemployment can sometimes have a greater impact on U.S. REIT net operating income growth than corporate capital allocation such as property expense management. This is a surprising revelation, since real estate cash flow growth is intuitively tied principally to location and management acumen, according to a new Fitch Ratings report. Economic factors provide insight into the achievability of 2015 same-store net operating income (SSNOI) guidance.

Fitch's midpoint estimates for 2015 same-store net operating income growth for the four major CRE property types are 3.3% for industrial, 4.3% for multifamily, 3.5% for office and 3.0% for retail. They differ by approximately 20 bps, 20 bps, 50 bps, and 10 bps, respectively, from the median 2015 SSNOI growth guidance of a representative sample of U.S. equity REITs in these sectors.

U.S. office property fundamentals should accelerate during 2015, and Fitch's outlook for SSNOI growth is 50 bps above the median company guidance. Fitch has an above-average outlook for CBD fundamentals, largely due to the agency's expectations for net absorption and rental rate growth to be near the upper bounds of their historical ranges and below-average growth in office supply. Fitch's view of suburban office fundamentals has shifted to average performance from below average given the momentum in select Sunbelt markets.

Fitch estimated growth for industrial SSNOI was 2% in 2014, while the median industrial REIT SSNOI was 3.7%. Contributing to this was the unemployment rate, which fell 80 bps more over the course of the year than expected, as well as net absorption outpacing completions by nearly 25%. Fitch estimates continued low single-digit growth for industrial REITs in 2015.

Fitch's 2014 estimate for multifamily REITs was 60 bps above the actual 4.2% median, and on a four-year compound average basis was within 20 bps. This was despite the fact that in some years, estimates varied more significantly from actuals given timing differences between the rate of GDP and employment growth, and that growth in the renter pool was not directly embedded into Fitch estimates. Looking ahead, growth is expected to continue as the homeownership rate continues to fall thereby increasing the renter pool, offset by increased supply, which represents a source of downside risk.

Fitch's retail SSNOI estimate was 60 bps below the actual 3.3% median NOI reported in 2014, and, on a four-year compound average basis, was within 25 bps. Retail was the only property sector that experienced declining rental rates in 2011 and also had the lowest growth rate in 2013 among the four major property types. Fitch estimates median retail SSNOI growth for 2015 of 3.0%, driven by expectations of U.S. GDP growth of 3.1% and an expected unemployment rate of 5.1%.

'U.S. REITs: Macroeconomic Factors Key to Portfolio Performance', is available at 'www.fitchratings.com' or by clicking on the above link.