The Federal Reserve and many Wall Street participants expected a series of interest rate cuts this year. But with inflation proving much more stubborn than many economists and analysts predicted, those expectations have been fading quickly in recent weeks.

Edward F. Pierzak, SVP of research at Nareit, in recent blogpost, argued that the potential postponement of interest rate cuts is “still not expected to pose a problem for U.S. public equity REITs.”

Pierzak cited fourth-quarter 2023 data from the Nareit Total REIT Industry Tracker Series (T-Tracker) to emphasize that REITs have maintained long-term, well-structured balance sheets with low leverage ratios, mostly using unsecured loans and fixed interest rates.

“With their disciplined balance sheets, REITs may not be immune from higher interest rates, but they are reasonably well-insulated from them,” he wrote.

According to T-Tracker data, as of the fourth quarter of 2023, the average REIT leverage ratio was 33.2%, the weighted average term to maturity was 6.3 years, and the average in-place cost of REIT debt was 4.1%, which is higher than its low average, which hovered just above 3 percent in 2022, but in line with its averages from 2016 through 2019.

Highlighting REITs’ typical longer term investment focus, fixed rate debt accounted for more than 90% of total REIT debt in the fourth quarter of 2023. Unsecured debt comprised nearly 80% of total debt, noted Pierzak.