10/08/2017

Equity REIT Yields Outpace Broader Equity Market

$74.0 Billion in Capital Raised in First Nine Months: Up 25%

WASHINGTON, DC, Oct. 6 — mREITs led the performance of the U.S. REIT industry in the first three quarters of 2017. The FTSE Nareit Mortgage REITs Index delivered a 20.04 percent total return for the period, helped by a 3.50 percent gain in the third quarter. In comparison, the FTSE Nareit All Equity REITs Index delivered a 6.04 percent total return for the first nine months of the year and a 1.11 percent return for the third quarter.

The FTSE Nareit All REITs Index, which gauges the performance of the entire listed U.S. REIT market and contains both Equity and mREITs, had a total return of 6.74 percent in the first nine months of the year and 1.24 percent in the third quarter. The S&P 500 delivered a total return of 14.24 percent in the first nine months of 2017 and 4.48 percent in the third quarter.

“Mortgage REITs have rewarded their investors with strong total returns,” said Nareit President and CEO Steven A. Wechsler. “While Equity REITs have underperformed the broader market so far this year, REIT operating fundamentals remain solid, and the industry is continuing to provide the stable income and portfolio diversification that many investors are seeking.”

Data Center, Infrastructure and Industrial Sectors Lead Equity REIT Returns

Among Equity REITs, which account for more than 90 percent of the U.S. REIT industry’s equity market capitalization, the Data Center, Infrastructure, and Industrial segments of the market delivered the strongest gains for the first three quarters of 2017, with returns of 27.95 percent, 24.39 percent and 18.46 percent, respectively.

Other Equity REIT market sectors with double digit total returns for the first nine months of the year were Manufactured Home Communities (17.03 percent); Timberlands (16.26 percent); Specialty (15.36 percent); and Single Family Homes (13.79 percent).

Among mREITs, Home Financing REITs produced the strongest total returns at 23.97 percent for the first three quarters of the year. Commercial Financing REITs delivered a 7.97 percent gain for the period.  

Nearly Half of Equity REIT Market Segments Deliver 4+ Percent Yields

REITs have continued to provide attractive dividend yields for income-seeking investors. The dividend yield of the FTSE Nareit Mortgage REITs Index was 9.56 percent at the end of the third quarter, with Home Financing REITs yielding 10.15 percent and Commercial Financing REITs yielding 7.66 percent.

Seven Equity REIT market segments delivered yields greater than 4 percent at the end of the third quarter, surpassing the 3.85 percent yield of the FTSE Nareit All Equity REITs Index. They included:

  • Specialty – 5.93 percent
  • Health Care –  5.31 percent
  • Free Standing Retail – 4.97 percent
  • Diversified – 4.91 percent
  • Regional Malls – 4.85 percent
  • Lodging/Resorts – 4.74 percent
  • Shopping Centers – 4.64 percent

In comparison, the dividend yield of the S&P 500 at the end of the quarter was 1.97 percent.

REITs Active in Public Capital Markets

Stock exchange-listed REITs raised 25 percent more capital in the public markets in the first three quarters of 2017 than in the same period in 2016. REITs raised $73.97 billion of equity and debt in the first nine months of this year compared with $59.12 billion in the same period last year. Secondary equity offerings totaled $33.81 billion in this year’s first nine months, compared with $26.47 billion in the same period last year. Unsecured debt offerings totaled $37.24 billion, compared with $31.16 billion last year.

The equity raised by REITs in the first three quarters of this year included $2.92 billion in nine IPOs, compared to $1.48 billion raised in three IPOs in the same period in 2016. 

The total equity market capitalization of the 225 REITs in the FTSE Nareit All REITs Index on September 30th was $1.12 trillion. The equity market capitalization of the 191 REITs listed on the New York Stock Exchange was $1.02 trillion.

Global Listed CRE Delivers Double Digit Returns

The FTSE EPRA Nareit Global Real Estate Index delivered a 10.84 percent total return in the first three quarters of 2017, measured in U.S. dollars. The index’s listed real estate companies have a collective $1.62 trillion in equity market capitalization, with approximately three-fourths of the total from REITs.

The Asia/Pacific region was the top performing global market region in the first three quarters of the year with a 20.68 percent total return. Europe delivered a 19.65 percent total return, followed by Middle East/Africa with a 4.77 percent gain, and the Americas region with a 3.26 percent gain.

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