07/02/2009 | By Allen Kenney
By Allen Kenney
The U.S. REIT market completed its best quarter ever in June, as the FTSE NAREIT Equity REIT Index gained 28.9 percent in the second quarter of 2009. The index's performance marked its highest quarterly gain since its inception in 1972.
The index dropped 2.5 percent for the month of June, bringing its return in the first half of 2009 to -10.5 percent. Domestic REITs continued to lag the broader markets, as the broader indexes have seen muted gains this year.
Richard Moore, a REIT analyst with RBC Capital Markets, said the REIT industry has tended to track financial stocks in the past two years, so he speculated that improved performance from the banking sector had helped lift REITs in the three-month period ending in June. More importantly, however, he said the strong performance signaled that investors' faith in the sector had been restored. That includes the financial system, as REITs began to take advantage of thawing in the capital markets, according to Moore.
"I think there was a recognition that REITs will survive," Moore said.
Looking ahead, Moore said he expects REITs' overall performance to continue to improve in the second half of 2009, although not at the same pace witnessed in the first six months. "It's hard to imagine that the U.S. economy is going to be strong enough to drive REITs substantially higher," he said.
The FTSE EPRA/NAREIT Global Real Estate Index held steady in June, climbing 0.1 percent. Overall, the international index is up 8.4 percent in 2009, including a 37.3 percent upswing in the second quarter of the year.