Commercial mortgage and health care REITs had the industry’s strongest returns in February, posting total returns of 6.71 percent and 5.35 percent, respectively.
Overall, U.S. equity REITs posted gains of 1.24 percent in February, according to data from the FTSE NAREIT U.S. REIT Index. The S&P 500 held steady, down 0.02 percent for the month.
The mortgage REIT sector posted gains of 1.65 percent, up slightly more than the equity REIT returns. Brad Case, NAREIT’s senior vice president of research and industry information said some of the uncertainty that has plagued the mortgage sector appears to be dissipating.
“Even though mortgage REITs outpaced equity REITs, it was specifically commercial mortgage REITs that did very well,” Case said. “It may have something to do with just thoughts about the health of the commercial real estate market going forward. Plus, they offer just terrific dividend yields, and investors, of course, are looking for that.”
In terms of sectors within the equity REIT market, health care was the strongest performer, gaining 5.35 percent. Case noted that he thinks investors are confident that the demand for health care facilities is going to increase.
Health care REITs “are also in a very good position to get assets from private companies that are not yet held on the public side of the market,” he said.
Shopping center and free standing retail REITs also showed strong gains for the month, posting total returns of 3.80 percent and 5.37 percent respectively. Their performance ran counter to concerns that the payroll tax cut would reduce consumer spending, according to Case.
Despite the federal government’s sequestration spending cuts taking effect in March, office REITs didn’t appear to suffer in February. Office REITs had total returns of 2.85 percent for the month.
“I don’t expect sequestration to have a dramatic effect,” Case said. “Most office REITs have a well-diversified portfolio so they would not even be affected very strongly even if it did have a big effect.”