Posting Double Digit Returns, Free Standing Retail REITs Deliver Industry’s Top Performance in 2018

WASHINGTON, D.C. January 16, 2019 – Free standing retail REITs were the top performing segment of the U.S. REIT market in 2018, delivering a 13.93 percent total return for the year. The manufactured homes segment also posted a double-digit return at 11.43 percent.

While the year was an extremely volatile one for all stock investors, REITs slightly outperformed the S&P 500 and significantly outpaced the Russell 2000. The FTSE Nareit All REITs Index, the broadest index of the U.S. REIT market containing both equity and mortgage REITs, had a negative total return of 4.10 percent and the FTSE Nareit All Equity REITs Index had a negative total return of 4.04 percent. The FTSE Nareit Mortgage REITs Index was down 2.52 percent. In comparison, the S&P 500’s total return was negative 4.38 percent, and the Russell 2000’s total return was negative 11.01 percent.

In addition to the outperformance of the free standing retail and manufactured home market segments, five other segments of the REIT market had total returns that were in the black. Health care REITs delivered a 7.58 percent total return for the year, followed by infrastructure REITs with 6.99 percent, apartment REITs with 3.70 percent, and self-storage REITs with 2.94 percent. The commercial financing mortgage REIT segment produced a 3.51 percent total return.

REITs continue to provide strong dividend yields for investors

REITs continued to reward income-seeking investors with strong dividend yields. At year-end, the dividend yield of the FTSE Nareit All REITs Index was 4.80 percent, the yield of the FTSE Nareit All Equity REITs Index was 4.37 percent, and the yield of the FTSE Nareit Mortgage REITs Index was 11.48 percent, compared to 2.22 percent for the S&P 500.

Equity REIT property segments that provided investors with dividend yields at year-end that exceeded the yield of the FTSE Nareit All Equity REITs Index included:

  • Specialty – 6.95 percent
  • Lodging/Resorts – 6.49 percent
  • Diversified – 5.78 percent
  • Timber – 5.76 percent
  • Regional Malls 5.54 percent
  • Shopping Centers – 5.52 percent
  • Free Standing Retail – 4.61 percent

Industry’s leverage remains low

REITs maintained low debt ratios in 2018, with the debt ratio (total debt divided by total debt plus equity) of the FTSE Nareit All Equity REITs Index at 32.3% at the end of the third quarter, up slightly from 31.7% at the same time in 2017.

REITs raised $46.72 billion in equity and debt from public capital markets in 2018, down significantly from the record $92.56 billion raised in 2017. Equity raised in 2018 included $3.26 billion from five IPOs, $16.65 billion in secondary common shares and $1.58 billion in secondary preferred shares. REITs also raised $25.22 billion in secondary debt.

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