Earlier this week, I had expressed my concerns on the near–term outlook for Real Estate Investment Trusts and REIT ETFs. Last week, CreXus Investment’s (CXS) initial public offering received a cool reception. This week Apollo Commercial Real Estate Finance (ARI) and Colony Financial (CLNY) halved the size of their IPOs on lack of investor demand. This reduction in size did not however prevent ARI and CLNY shares from receiving a haircut today, their first day of trading.

The REITS are trying to take advantage of increased investor risk appetite. The supply is however hitting the market at a time when concerns of falling commercial property values, declining rents, and rising defaults are returning to the forefront and weighing on real estate investment trusts.