05/04/2010 | By Allen Kenney
In April, U.S. REITs continued their string of strong performances, as the FTSE NAREIT All REIT Total Return Index gained 6.58 percent for the month. Year to date, the index is up 16.79 percent.
The broader market measures, such as the Russell 2000 and NASDAQ Composite, trailed REITs in April, increasing between 1.40 percent and 5.88 percent. In the first four months of 2010, the S&P 500 gained 7.05 percent.
A report issued on May 4 by DLA Piper offered some hints regarding the factors driving REITs' strong showing in 2010. The survey of more than 300 senior executives in the commercial real estate industry found that 60 percent believe the market has either bottomed out or will do so this year. The percentage of respondents who consider themselves "bullish" on the market grew from 10 percent in September 2008, the last time the survey was administered, to 40 percent in the latest version.
In terms of industry sectors, respondents ranked multifamily portfolios as the most attractive investment opportunities in the next year. After being battered by the recession, the hotel sector ranked second.
"We are seeing clear signs that key sectors of the real estate industry are in recovery mode," said Jeffrey Rogers, president and COO of Integra Realty Resources. Integra produces its own commercial property index, which indicated in the first quarter of 2010 that the sharp declines in pricing seen during the last two years are moderating.
Integra projected that the overall pricing level for commercial real estate assets would fall just 2 percent in the next six months. Conversely, the major commercial sectors lost between 7 percent and 15 percent of their value in the previous 12 months.