01/10/2013 | By Allen Kenney
U.S. REIT stocks outperformed the broader equity market for the fourth consecutive year in 2012, according to data from NAREIT released on Jan. 8.
The FTSE NAREIT All REITs Index, which includes both equity and mortgage REITs, delivered a 20.14 percent total return for the year, and the FTSE NAREIT All Equity REITs Index returned 19.70 percent compared to the S&P 500's 16 percent gain.
The FTSE NAREIT All Equity REITs Index's 2012 gain came on top of total returns of 8.28 percent in 2011, 27.95 percent in 2010 and 27.99 percent in 2009. The S&P 500 returned 2.11 percent, 15.06 percent and 26.46 percent, respectively, in those years.
The total returns of the FTSE NAREIT All Equity REITs Index also exceeded those of the S&P 500 for the 3-, 5-, 10-, 15-, 20-, 25-, 30-, 35- and 40-year periods ended Dec. 31, 2012.
In a video interview with REIT.com, Brad Case, NAREIT's senior vice president of research and industry information, offered his analysis of the REIT market's performance.
"It was another strong year for REITs. In fact, if you look at REIT returns, over not just 2012, but the previous years, REITs have outperformed all three segments of the stock market in each of the past four years," Case said. "So, the story of REIT outperformance over the rest of the stock market is not a new one."
Case gave his assessment of the volatility of REITs last year as well.
"Many investors know that the volatility of not just the stock market, but even more so the REIT market, went up dramatically during the liquidity crisis of 2008 and 2009," Case said. "What many investors may not realize, though, is how strongly volatility has dropped since then. Volatility has come down by more than two-thirds since the peak in early 2009. Volatility in the REIT market now is just barely greater than the volatility of the broader stock market. In fact, it's even less than it was for most of the 15 years before the liquidity crisis hit. At the same time, the correlation between REITs and the stock market is only at about 75 percent."