The Monitor's editors maintain their belief that industrial REITs are attractive investments on a risk-adjusted basis with total returns estimated in the mid teens. Currently, they are at 90.9% of net asset value and 8.7x estimated 2002 funds from operations on average, while office REITs now trade at 9.5x and apartment REITs at 9.8x.

Going forward, Bear Stearns analysts project FFO per share growth to rise to 7% in Q3 and 12.6% in the fourth quarter. For the year, the consensus is that these firms will earn 8.9% FFO per share growth and 9.2% in 2002.

Factors favorable to industrial REITs include their appeal to pension funds, many of which are underweighted to real estate and disposed to industrial properties. Also, the REIT Modernization Act, which went into effect this year, is expected to transform these trusts into larger entities and their taxable subsidiaries into major enterprises.