REIT Returns More Than Double the S&P 500 in 2Q 2018

WASHINGTON, D.C., July 12—REITS outperformed the broader equity market in the second quarter and the month of June, Nareit reported. The FTSE Nareit All REITs Index, the broadest index of the U.S. REIT market containing both equity and mREITs, delivered an 8.32 percent total return in the second quarter, while the FTSE Nareit All Equity REITs Index gained 8.50 percent and the FTSE Nareit Mortgage REITs Index was up 4.71 percent. By comparison, the total return of the S&P 500 in the second quarter was 3.43 percent.

For the month of June, the FTSE Nareit All REITs Index’s total return was 4.06 percent; the FTSE Nareit All Equity REITs Index delivered a 4.18 percent gain and the FTSE Nareit Mortgage REITs Index was up 1.48 percent. The S&P 500 gained 0.62 percent in the month.

“After a challenging start to 2018, REIT returns have come around and are performing more consistently with economic conditions and REIT market fundamentals today,” said Nareit President and CEO Steven A. Wechsler.

Strong Returns Across Market Segments

Nine REIT property segments delivered second quarter total returns that exceeded the total return of the FTSE Nareit All Equity REITs Index, with six segments delivering double-digit returns.

Self-storage REITs outperformed all other segments with a 15.10 percent total return for the quarter. Total returns of other top performing segments were:

  • Health Care – 14.21 percent
  • Lodging/Resorts – 14.14 percent
  • Specialty – 12.62 percent
  • Diversified – 12.57 percent
  • Shopping Centers – 12.18 percent
  • Free Standing Retail – 9.74 percent
  • Industrial – 9.35 percent
  • Regional Malls – 9.12 percent

Among mREITs, Commercial Financing REITs provided a 5.56 percent total return in the second quarter and Home Financing REITs returned 4.41 percent.

Income Investors Find Much To Like

For investors seeking income, REITs continued to offer attractive dividend yields. On June 30, the dividend yield of the FTSE Nareit All REITs Index was 4.30 percent. The dividend yield of the FTSE Nareit All Equity REITs Index was 3.96 percent, and the dividend yield of the FTSE Nareit Mortgage REITs Index was 10.35 percent, with Home Financing REITs yielding 11.17 percent and Commercial Financing REITs yielding 8.18 percent. By comparison, the dividend yield of the S&P 500 on June 30 was 1.95 percent.

Among REIT property segments, Specialty REITs delivered the highest dividend yield of 6.02 percent on June 30. Other segments with dividend yields that surpassed the yield of the FTSE Nareit All Equity REITs Index were:

  • Health Care – 5.89 percent
  • Free Standing Retail – 5.01 percent
  • Shopping Centers – 4.94 percent
  • Diversified—4.93 percent
  • Regional Malls – 4.89 percent
  • Lodging/Resorts – 4.80 percent

Public listed REITs paid out $53.2 billion in dividends in 2017.

Capital Raising Was Conservative in 2Q 2018

With REIT shares trading at discounts through much of the second quarter, capital raising was restrained. REITs raised a total of $7.92 billion in public markets in the quarter, including $523 million in one IPO; $1.50 billion in secondary offerings of common shares; $316 million in offerings of preferred shares; and $5.59 billion in unsecured debt.

By comparison, in the second quarter of 2017, REITs raised $21.05 billion in public markets, including $765 million in four IPOs; $8.79 billion in secondary common equity; $1.26 billion in preferred shares and $10.23 billion in unsecured debt.

At June 30, the 225 REITs in the FTSE Nareit All REITs Index had a combined equity market capitalization of $1.15 trillion, and the 172 REITs in the FTSE Nareit All Equity REITs Index had an equity market capitalization of $1.07 trillion.

REITs continued to maintain a conservative debt ratio of 33.5 percent, near the industry’s historic low.

The publicly listed REIT industry’s average daily dollar trading volume in June was $7.8 billion, up from $6.1 billion in June 2013 and more than double the $3.1 billion average daily dollar trading volume in June 2008.

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