08/05/2009 | By Allen Kenney
U.S. REITs bested the broader markets in July, as the FTSE NAREIT All REIT Index gained 10.2 percent for the month.
The Index edged out the broader market measures, as the S&P 500, Russell 2000, Dow Jones Industrials and NASDAQ Composite all increased between 7.6 percent and 9.6 percent. The FTSE NAREIT All REIT Index's strong performance carried over into early August, up 6.6 percent through August 4. For the year, the Index had posted a 5.1 percent gain.
"At the beginning of July, we started seeing better-than-expected corporate results. The rally was sustained by a continuation of that trend, as well as better economic indicators coming out, which generally flowed through to REITs," said Ki Bin Kim, a REIT analyst with Macquarie Capital (USA) Inc.
Looking ahead, Michael Levy, another REIT analyst with Macquarie, said that despite the recent rally, REITs should still expect a rocky ride through the end of 2009. However, investors appear optimistic about REITs' longer-term prospects, he said.
"Going forward, I think there are still a lot of concerns about commercial real estate and the role that REITs are going to play in the absorption of the commercial real estate overhang," Levy said. "The recent rally seems to indicate a belief that REITs are, at the very least, going to take advantage of any opportunities that are provided to some degree."
The FTSE EPRA/NAREIT Global Real Estate Index saw similar returns to the U.S. index in July, climbing 10.4 percent. That included a 12.3 percent increase in the Global Index's European component.