FTSE Nareit All REITs Index Up 11.4% in January

REIT returns rebounded in January, and outpaced the broader market, as volatility continues to be a major factor.

The total returns of the FTSE Nareit All REITs Index rose 11.4 percent in January, while the S&P 500 rose 8.0 percent. The total returns of the FTSE Nareit Mortgage REIT Index gained 9.1 percent, while the yield on the 10-year Treasury note lost 0.1 percent.

In December, the FTSE Nareit All REITs Index fell 7.7 percent.

James Sullivan, analyst at BTIG, remarked that the level of volatility seen in the last 60 days is “extremely rare.” He noted that the last period of such dramatic swings in returns was in 2008 to 2009, when overall there were eight months when returns were above or below 10 percent.

Analysts noted that interest rate developments were a key factor moving REIT share prices last month.

John Massocca, analyst at Ladenburg Thalmann & Co., Inc., noted that “the fact that the 10-year Treasury and other long-term interest rates have moved down as well, was a big positive catalyst. The Federal Reserve changing its tone significantly from December was a real tailwind.”

Sullivan added that the Fed’s indication that the case for raising rates had weakened was “very positive for the whole market.” At the same time, much of the fourth quarter talk about the risk of a recession appeared to have dissipated last month, he said.

Among the top performing REIT sectors last month, timberland REITs saw returns of 18.3 percent, industrial REITs posted returns of 15.3 percent, and returns of 14.8 percent were recorded for shopping center REITs. Office REIT returns advanced 14.5 percent.

Meanwhile, apartment REIT returns added 10.5 percent in January. “We’ve been pretty aggressively positive; revenues are likely to trend better than the market is expecting,” Sullivan said.