U.S. REITs OUTPACE BROADER EQUITY MARKET IN FIRST THREE QUARTERS
REITs Gain 12.6%, While S&P 500 is Up 7.8%
Free Standing Retail REITs Lead Other Property Sectors With a 34.5% Return
WASHINGTON, DC, Oct. 25—U.S. REIT returns continued to outpace returns of the broader equity market in the first three quarters of 2016, according to the National Association of Real Estate Investment Trusts (NAREIT). The FTSE NAREIT All REITs Index, the broadest benchmark of the U.S. REIT industry containing both Equity and Mortgage REITs, delivered a 12.57 percent total return in the first nine months of 2016. The FTSE NAREIT All Equity REITs Index, delivered a total return of 12.31 percent in the same period, and the FTSE NAREIT Mortgage REITs Index delivered a total return of 20.16 percent. In comparison, the S&P 500’s total return was 7.84 percent.
In the 12-month period ending September 30, the total return of the FTSE NAREIT All REITs Index was 20.60 percent, the total return of the FTSE NAREIT All Equity REITs Index was 20.94 percent, and the total return of the FTSE NAREIT Mortgage REITs Index was 18.89 percent. The S&P 500 delivered a total return of 15.43 percent in the same period.
“With their highly competitive total returns, as well as their strong ability to generate income and provide critical portfolio diversification, REITs have continued to demonstrate why they should be a core allocation in investment portfolios in all investment environments,” said NAREIT President and CEO Steven A. Wechsler.
Four Property Segments Deliver Returns of More Than 20%
Most Equity REIT property sectors produced total returns that outperformed the 12.31 percent return of the FTSE NAREIT All Equity REITs Index in the first three quarters of 2016.
- Free Standing Retail REITs led the Equity REIT market’s performance with a 34.45 percent total return for the period.
- The Industrial sector followed with a 31.07 percent gain.
- Single Family Home rentals delivered a total return of 29.08 percent.
- Data Centers posted a 25.39 percent total return.
- Health Care REITs gained 19.29 percent.
- Infrastructure REITs were up 18.26 percent.
- Among Mortgage REITs, Home Financing Mortgage REITs led the market with a 22.96 percent total return for the first three quarters of the year.
REITs’ Dividend Yield Almost Doubles S&P 500’s
For income investors, REITs continued to offer solid yields. At September 30, the dividend yield of the FTSE NAREIT All REITs Index was 4.05 percent and the yield of the FTSE NAREIT All Equity REITs Index was 3.70 percent – almost twice that of the S&P 500’s yield of 2.12 percent. The dividend yield of the FTSE NAREIT Mortgage REITs Index was 10.23 percent.
Among Equity REIT sectors, six delivered dividend yields that beat the FTSE NAREIT All Equity REITs Index’s yield performance.
- The Specialty sector led the market with a 6.31 percent dividend yield at September 30.
- Lodging/Resorts delivered a 5.69 percent yield.
- Health Care produced a 5.08 percent yield.
- The Diversified sector produced a 4.28 percent yield.
- Free Standing Retail’s dividend yield was 3.96 percent
- And the dividend yield of the Timber REIT sector was 3.88 percent.
Public Capital Raised in First 9 Months of 2016 Equals Amount Raised in All of 2015
The U.S. REIT industry had significant support from the public capital markets in the first three quarters of 2016. The industry raised $59.1 billion in equity and debt in the public markets in the first nine months of the year – approximately the same as the $59.3 billion it raised in the entire year of 2015. The equity market capitalization of the FTSE NAREIT All REITs Index was $1.05 trillion at September 30.
The industry also continued to maintain a strong balance sheet. The debt ratio (total debt divided by the sum of total equity and total debt) of the FTSE NAREIT All REITs Index was 40.6 percent, down from 45.1 percent at the same time in 2015; and the debt ratio of the FTSE NAREIT All Equity REITs Index was 31.0 percent, down from 34.1 percent at the same time in 2015.