According to Grupe, returns to REIT stocks were largely uncorrelated by both large- and small-cap stocks. "The lodging sector posted a total return of 46% last year, the highest among all sectors," Grupe said. "The office and apartment sectors were next in line with nearly identical returns of about 35%. The industrial, regional mall, diversified and health care sectors all registered total returns in the 25% to 30% range."

Grupe noted that relatively stable or rising stock prices and accelerating earnings growth placed public real estate securities in a relatively favorable light. "The price volatility of the NAREIT Equity REIT index increased just 13% since the end of 1996 and remains appreciably less than half that of the Nasdag," he says.

The average REIT earning growth remained at around 10% and, according to quarterly earnings reports last year, the slowdown of earnings growth might have stabilized. During the past 20 years, the income return averages 8.5%. Annual REIT dividends have grown annually at 6.6% since 1992, a rated that has outpaced the rate of consumer price inflation, Grupe said.