A recent report by LaSalle Investment Management says stocks issued by real estate investment trusts have outperformed most market benchmarks this year due to the underlying health of the real estate industry.
REITs, as measured by the NAREIT Real Estate Equities Index, posted an 11.4% return in the first six months of 2001, beating the losses posted by most major indexes.
Safety was a primary motivator for investors' interest in REIT stocks.
"Real estate proved to be an excellent shelter from the turbulence of the market this year," said William Morrill, Jr., managing director and chief executive of LaSalle Investment.
So far this year, LaSalle reported that regional mall, self-storage and healthcare REITs generated the highest returns among real estate sectors. And the market leaders of last year--office, industrial and multifamily--continue to lag in 2001.
LaSalle reports that the real estate crash of a decade ago has wrought at least two lessons--restrained development and judicious use of credit--two factors they say make the underlying real estate market for REITs stable going forward.
Although multifamily REITs have not been the sector leader this year, LaSalle is positive on the multifamily industry. It reports that rental growth increased 6.2%, and average occupancy remains 95%
The future is not so bright for the office and industrial markets. LaSalle estimates that vacancy rates may increase nationwide .5% this year and another 1% in 2002. But slowing construction should stabilize occupancy by 2003, the firm reported.
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