Lagging Valuations May Affect Retail

Erika Morphy is co-editor of Debt and Equity Journal, from which this article is excerpted.

Washington, DC—Retail and institutional investors have had their faith in REITs rewarded for the past seven years. That is how long REIT returns have outperformed the broader market, according to data compiled by the National Association of Real Estate Investment Trusts. That record, however, and investors’ faith in it, is over.

Nareit reports that the FTSE Nareit All REITs Index delivered a -6.96% total return for the first six months of 2007. This trails returns of the S&P 500 (6.96%), the Dow Jones Industrials (7.59%), the Russell 2000 (6.45%) and the NASDAQ Composite (7.78%). The lodging/resorts sector, with a total return of 2.97%, and the specialty sector, with a total return of 6.61%, outperformed REITs as well.