Like other segments of the CRE market, REITs have been buffeted by tighter lending conditions, higher interest rates that put pressure on valuations and fundamentals, and macroeconomic headwinds. Surveying the battlefield, Fitch Ratings has slashed its 2023 outlook for REITs from "neutral" to "deteriorating."

Lending by banks, which Fitch says represent about half of the $5.5 trillion commercial mortgage market, dropped 20% from February to April this year, and tightened again in May. Expected further contractions in CRE credit will limit opportunities for transactions.

Even so, Fitch believes most of the REITs it rates "have the capacity to withstand such a slowdown within rating sensitivities." Some "with ample dry powder" could even find opportunities to bargain hunt by capitalizing on distressed property sales.