Mortgage REITS Lead REIT Market Gains in 2017’s First Half

Half of Equity REIT Property Sectors Deliver Double-digit Total Returns

$44.2 Billion in Public Capital Raised in First Six Months

WASHINGTON, DC, July 11—Total returns of stock exchange-listed U.S. REITs, led by Mortgage REITs, climbed in June, the second quarter and the first half of 2017, the National Association of Real Estate Investment Trusts (NAREIT) reported.

NAREIT said the FTSE NAREIT All REITs Index, the broadest U.S. REIT index encompassing both Equity and Mortgage REITs, delivered a 2.03 percent total return in June, 2.40 percent in the second quarter and 5.43 percent in the first half of 2017.

The FTSE NAREIT Mortgage REITs Index, containing only Mortgage REITs, gained 2.51 percent in June, 4.66 percent in the second quarter and 15.98 percent in the first half of the year. The FTSE NAREIT All Equity REITs Index, including only Equity REITs, was up 1.96 percent in June, 2.27 percent in the second quarter and 4.88 percent for the first half of the year.  The S&P 500’s total return was up 0.62 percent in June, 3.09 percent in the second quarter and 9.34 percent in the first half of the year.

“While REIT returns trailed the broader equity market in the first half, the industry continues to grow, reflecting solid operating performance and the overall health of the economy, which is supporting demand for real estate across the full spectrum of REIT market sectors,” said NAREIT President and CEO Steven A. Wechsler. 

Infrastructure, Data Centers, Manufactured Homes 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 Infrastructure, Data Centers, and Manufactured Homes segments of the market delivered the strongest gains in the first half with total returns of 22.15 percent, 21.68 percent and 18.70 percent respectively.

Other Equity REIT market sectors with double digit total returns for the first half of 2017 were Single Family Homes (12.94 percent); Timberland (12.75 percent); Specialty (12.56 percent); Health Care (12.54 percent); and Industrial (11.21 percent).

Among Mortgage REITs, Home Financing REITs produced the strongest total returns in the first half of the year – up 18.47 percent. 

Half of Equity REIT Market Segments Deliver 4+ Percent Yields

REITs continued to provide attractive dividend yields for income-seeking investors.  The dividend yield of the FTSE NAREIT Mortgage REITs Index at June 30 was 9.76 percent, with Home Financing REITs yielding 10.35 percent and Commercial Financing REITs yielding 7.85 percent.

More than half of all Equity REIT market segments delivered yields greater than the 3.85 percent yield of the FTSE NAREIT All Equity REITs Index on June 30.  They included:

  • Specialty – 5.99 percent
  • Free Standing Retail – 5.21 percent
  • Health Care – 5.01 percent
  • Diversified – 4.95 percent
  • Lodging/Resorts – 4.94 percent
  • Shopping Centers – 4.73 percent
  • Regional Malls – 4.59 percent
  • Self-Storage – 4.05 percent

In comparison, the dividend yield of the S&P 500 at June 30 was 2.00 percent.

REITs Active in Equity and Debt Markets; 7 IPOs in First Half

Stock exchange-listed REITs raised more capital in both the public equity and unsecured debt markets in the first half of 2017 than in the same period in 2016, and seven REIT IPOs were launched in the first half of this year compared to two in the first half of 2016.

REITs raised $44.17 billion in equity and debt in the first half of this year compared with $37.86 billion in the first half of 2016.  The seven IPOs in this year’s first half raised a total of $2.64 billion compared with $1.26 billion for the two IPOs in last year’s first half.

Secondary equity and debt issuance were approximately balanced in both 6-month periods, with $19.85 billion in secondary equity issued in the first half of this year compared with $19.49 billion in the first half of last year, and $21.67 billion of unsecured debt issued in the first half of this year compared with $20.31 billion in the first half of last year.

The total equity market capitalization of the 226 REITs in the FTSE NAREIT All REITs Index on June 30 was $1.1 trillion.  The equity market capitalization of the 192 REITs listed on the New York Stock Exchange was $996.30 billion.

Global Listed CRE Markets Deliver Gains

The FTSE EPRA NAREIT Global Real Estate Index delivered a 7.23 percent total return in the first half of 2017, measured in U.S. dollars.  The index’s listed real estate companies have a collective $1.6 trillion in equity market capitalization, approximately three-fourths of the total from REITs.

Europe was the top performing global market region in the first half of 2017, with a 14.15 percent total return.  The Asia/Pacific region delivered a 13.17 percent total return, followed by Middle East/Africa with a 5.26 percent gain and the Americas region with a 2.14 percent gain.

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The Nareit Media blog provides information for members of the news media on REITs, the REIT industry and Nareit. Media representatives seeking information on REIT returns, REIT performance relative to other investments, and the size and make-up of the U.S. REIT industry will find it here. Please see our Terms of Use.