Are we talking risky compared to equities and bonds? Inflation, rising interest rates and a reduction in the flow of cheap credit would have a significant impact on both of these as well. But I agree a levered mREIT is going to be riskier than a bond fund, hence the much greater dividend.
Agreed that it will have an impact on all of them except that it will have a greater impact REITS and bonds:
- bonds becaue they inversely related and with rates as low as they are even a small increase can result in a big capital loss (obviously doesn't apply if held to maturity which only is possible if you own actual bonds and not bond funds). Do the math - 10-year US Treasury is currently 1.7% if it goes to 2.0% (hardly high and hardly a big move) the underlying bond loses 15% of its value.
- REITs, because they use good amounts of leverage and cap rates (how commercial real estate is valued) is highly correlated to bonds. Apartments (the favored child right now) are topped out due to high leverage, low rates, and rental increase assumptions that are crazy. Industrial (the less favored child) REITs are probably the most stable (dependent on economy but not jobs as much, low capital costs) but yields are low right now here too, Office (the stepchild) REITS may be the best buy but they are so out of favor due to crappy economy, no jobs (need jobs for employees to fill those offices), and changing space usage (telecommuting, open/communal work environments).
As for mortgage REITs there is more risk there as you elude - these have the worst of both.
**Edit - Add that the other reason is that operating companies (Home Depot, MMM, etc.) generally have a more flexible balance sheets and income statements, which is why during the downturn you saw and continue to see strong profits even as revenue growth slowed. When growth slows working capital gets converted to cash that is used to reduce debt and they can reduce expenses (layoffs) and delay capital investments to manage through tough times. REITs don't have this luxury - high debt, low cash flow, largest expenses are property related (taxes, insurance, repairs, etc.) that can't really be cut.