REIT returns were lower in November, although on a year-to-date basis the sector continues to post a solid performance, market watchers said.
The total returns of the FTSE Nareit All REITs Index fell 1.4% in November, while the S&P 500 gained 3.6% during the same period. For the year to Nov. 29, the FTSE Nareit All REITs Index was 27.1% higher, while the S&P 500 was 27.6% higher over the same period.
The total returns of the FTSE Nareit mREIT Index gained 1.5% last month, while the yield on the 10-year Treasury gained 0.1%.
Analysts say the month was characterized by a risk-on sentiment, which prompted a decline in defensive REIT sectors such as health care and self-storage. They added that the health care REIT sector also came under pressure from third quarter earnings reports suggesting that fundamentals may not accelerate in the near term.
Matt Werner, portfolio manager at Chilton Capital Management, noted that despite the downturn in November, REITs remain well-positioned overall.
“Relative to equities, REITs are in a good spot in that they are able to provide a defensive place…if a trade deal gets done and the economy seems to reaccelerate, I think REITs will participate as well,” he said.
Werner added that the prospect of lower upside potential for REITs compared with the S&P, but with a much lower downside risk, “provides a very good investment prospect for people looking at the sector relative to other sectors.” He added that the value perspective that REITs offer today is “pretty good.”
Among the various REIT segments, returns for health care REITs fell 6.1%, although on a year to Nov. 29 basis, returns in the segment were 22.1% higher.
Self-storage REIT returns dropped 4.6% in November but were 12% higher for the year through November.
Meanwhile, lodging REIT returns advanced 2.6% last month and were 9.9% higher on a year through November basis. Industrial REIT returns were 2.3% higher in November and 52.4% higher for the year through November. Returns for manufactured home REITs gained 3.4% in November and were 59.4% higher for the year through the end of the month.