REIT Shorts Are Losing Their Lunch Money

Core Viewpoint - The article discusses the risks associated with shorting REITs, particularly in December 2025, when short interest increased as REIT prices were at their lows, suggesting that this strategy may lead to significant losses as the market rebounds in 2026 [1][3][5]. Group 1: Market Trends and Shorting Dynamics - Short interest in REITs surged in December 2025, coinciding with a market low for these assets [1][3]. - The Vanguard REIT ETF (VNQ) saw a substantial price increase in 2026, indicating that many shorts entered positions at an inopportune time [5]. - The average short position is currently underwater by about 5%, which is not unusual in the stock market [5]. Group 2: Risks of Momentum Investing - Shorting based on momentum is deemed particularly risky, as it assumes that price movements reflect underlying fundamentals, which may not always be the case [7][10]. - The average stock historically rises by 8%-9% annually, meaning that short sellers must outperform this benchmark to avoid losses [11][12]. - The asymmetry of risk in shorting is highlighted, as potential losses are theoretically unlimited while gains are capped at the stock price going to zero [17]. Group 3: Specific REITs Under Scrutiny - Centerspace (CSR) is identified as a heavily shorted REIT, with a short interest increase of 270 basis points in December [14][16]. - Other REITs with significant short interest include NETSTREIT (NTST), Acadia Realty (AKR), and Americold (COLD), each facing unique market conditions that challenge the short thesis [26][34][40]. - CSR is projected to remain profitable, with consensus estimates for FFO per share showing steady growth through 2027, making it a risky short position [20][22]. Group 4: Potential for Short Squeezes - The article suggests that CSR, NTST, AKR, and COLD are well-positioned for potential short squeezes due to high short interest and the stability of their underlying fundamentals [49][50]. - The demand for cold storage properties remains strong, indicating that Americold could recover from current oversupply issues, further complicating the short thesis [42][45]. - The overall sentiment is that shorting stable, profitable companies with high dividend yields is a precarious strategy, especially as market conditions improve [47][49].