02/05/2013 | By Carisa Chappell
U.S. REITs were up in the first month of 2013. The FTSE NAREIT All REIT Index had total returns of 4.28 percent in January. Equity REITs gained 3.74 percent for the month. The industrial sector got off to a particularly strong start, up nearly 9 percent, while timber REITs had total returns of 7.55 percent in January.
REITs trailed the S&P 500, which climbed 5.18 percent in January.
In a video interview with REIT.com, Brad Case, NAREIT’s senior vice president for research and industry information, discussed the January returns. Regarding timber REITs’ performance, he pointed out that the sector has outperformed for months now as new construction has increased, including residential construction. Case said other strong performances came from sectors that are benefitting from the broader economic recovery. These include the industrial sector and lodging REITs, which climbed 7.39 percent for the month.
Case also discussed REITs’ relationship with the capital markets in the current environment. Relatively easy access to capital is helping boost their performance, according to Case.
“The other driver of outperformance is that REITs have such good access to capital and are able to use that to make good acquisitions. That, again, is something that’s across the board,” Case said.
Additionally, Case discussed what some investors often refer to as the “January effect,” in which stocks typically over perform in the first month of the year. He downplayed the impact of the phenomenon on the REIT market in this case.
The January effect occurs “for various reasons, including how investors treat the end of the year. They may sell stocks in which they have a capital loss for tax reasons,” he said. “But what we’ve seen, generally, is that REITs have performed well in December as well, both in December 2012 and 2011. So, it’s not as though the January effect is making up for lost ground in December.”
Equity REITs had dividend yields of 3.6 percent, while mortgage REITs had dividend yields of 11.6 percent for the month. Case said he expects those to remain strong as well.