NAREIT's Wechsler points to REITs' “strong ability to generate income and provide critical portfolio diversification.”
WASHINGTON, DC—The REIT sector extended its outperformance streak across the first three quarters of 2016, NAREIT said Tuesday. All of the association's benchmark indices for REIT performance have outpaced the S&P 500 on both a year-to-date and trailing-12-month basis.
The FTSE NAREIT All REITs Index posted YTD returns of 12.57% for the nine months that ended Sept. 30 and 12-month returns of 20.60%. For the FTSE NAREIT All Equity REITs Index, total YTD and 12-month returns were 12.31% and 20.94%, respectively, while the FTSE NAREIT Mortgage REITs Index delivered YTD returns of 20.16% and 12-month returns of 18.89%. In comparison, the S&P 500's YTD return was 7.84% and its 12-month return was 15.43%.
Within the equity REIT universe, four property sectors delivered total returns of more than 20% for the first three quarters of this year. They were led by freestanding retail with 34.45%, followed by industrial with 31.07%, single-family rentals with 29.08% and data centers with 25.39%. Home financing REITs led the mortgage REIT index with a 22.96% total return for the first nine months.
The REIT indices also outperformed the S&P 500 in terms of dividend yields. As of Sept. 30, the dividend yield of the All REITs Index was 4.05% and the yield of the All Equity REITs Index was 3.70%, both nearly double that of the S&P 500's yield of 2.12%. The dividend yield of the FTSE NAREIT Mortgage REITs Index was 10.23%. Among individual equity REIT segments, specialty REITs performed best with 6.31%.
“With their highly competitive total returns, as well as their strong ability to generate income and provide critical portfolio diversification, REITs have continued to demonstrate why they should be a core allocation in investment portfolios in all investment environments,” says NAREIT president and CEO Steven Wechsler. They've also garnered strong support from the public markets: $59.1 billion in debt and equity for the first nine months of the year, nearly equal to the 12-month total of $59.3 billion for 2015.
REITs have also strengthened their balance sheets over the past year. The debt ratio of the All REITs Index was 40.6% at Sept. 30, down from 45.1% a year ago, while for the All Equity REITs Index it was 31.0%, down from 34.1% at the same time last year.
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Paul Bubny
Paul Bubny is managing editor of Real Estate Forum and GlobeSt.com. He has been reporting on business since 1988 and on commercial real estate since 2007. He is based at ALM Real Estate Media Group's offices in New York City.
