Fundamentally Speaking: T-Tracker Shows Good Operating Performance by REITs in Q2

In the latest edition of Fundamentally Speaking, Calvin Schnure, NAREIT’s senior vice president for research and economic analysis, said NAREIT’s T-Tracker series showed good operating performance by REITs in the second quarter, and also points to “solid underpinnings” for future conditions in the REIT industry.

Schnure noted that funds from operations (FFO) for all Equity REITs rose a little more than 7 percent to $14.5 billion, which is more than 10 percent higher than a year ago.

Same store net operating income (NOI) rose 4.25 percent in the second quarter from a year ago. The star performers in the second quarter included self-storage, data center, and infrastructure REITs, Schnure pointed out.

Apartment REITs, meanwhile, saw some deceleration, Schnure said.  One of the reasons is that new supply has appeared in certain markets, particularly the West Coast, resulting in downward pressure on rent growth. As a result, same store NOI growth eased from 7 percent to 5 percent.

Retail REITs posted moderate growth in same-store NOI, Schnure said.

The picture for dividends was also bright, Schnure observed.

REITs paid out a total of $12 billion in dividends in the second quarter, including $10-½  billion from Equity REITs and $10.5 billion from Mortgage REITs, Schnure said.  Dividends have continued to post a steady rise quarter after quarter, Schnure stressed.

Meanwhile, Schnure pointed out that “solid underpinnings” continue to support REIT property fundamentals.

“There’s been good demand, even in the face of rising construction,” Schnure said.  As a result, occupancy rates have pushed to a record high of 93.7 percent across all the property types that REITs own. This rate is 20 basis points higher than the previous record, Schnure said, as demand continues to outpace supply.

At the same time, REITs renewed their acquisition activity in the second quarter, buying about $7 billion of properties on net. The renewed second quarter activity followed a period of volatility in the first quarter that pushed REITs’ cost of capital higher and hindered acquisition activity.

Investors looking for further information contained in the T-tracker quarterly summary should visit www.reit.com/T-tracker.