FTSE Nareit All REITs Index Up 1.6% in July

The total returns of the FTSE Nareit All REITs Index rose 1.6% in July, while the S&P 500 gained 1.4%. The total returns of the FTSE Nareit Mortgage REIT Index rose 2.3%, while the yield on the 10-year Treasury note was flat in July.

For the year through July 31, the FTSE Nareit All REITs Index gained 20.6% versus 20.2% for the S&P 500.

David Rodgers, senior analyst at Baird, noted that “we’re seeing really good later cycle fundamentals in both demand and supply generally. We’re on a long tail of the economy and REITs should continue to benefit.”

Rodgers pointed to the lower interest rate environment, and a “fairly rapid” decline in credit spreads as factors supporting the REIT market.

“Financing markets are incredibly robust for real estate today and that usually is a pretty good indicator of REIT performance,” he said.

“We still feel that REITs play a really good role in diversification. We still think they’re very defensive in the case of a slowing global economy… REIT performance has been pretty good this year overall, in light of all the uncertainty,” Rodgers observed.

Leading the way in July were infrastructure REITs, where returns advanced 3.8%. Year-to-date, returns for infrastructure REITs are 32.1% higher. Returns for office REITs were 3.6% higher last month, with returns of 20.5% for the year through to July 31.

Self-storage REIT returns gained 2.9% in July. Lindsay Dutch, analyst at Bloomberg Intelligence, noted that the sector was one of the worst performers in 2018, but so far in 2019 the sector is one of the top performers.

“They are still battling some excess supply, but 2019 may mark the peak for that. In spite of supply, many of the bigger players are finding opportunities for expansion, which was a little bit of a surprise that came with the better-than-expected second quarter results,” she said.

Shopping center REIT returns gained 3.0% in July and advanced 18.7% for the year to July 31. Dutch noted that many of the open-air shopping center owners have been less impacted by store closures than other owners of retail real estate.