Quick Study: Investor Uncertainty Produces Quiet Month for REITs

In the latest edition of Quick Study, Brad Case, NAREIT’s senior vice president for research and industry information, a “fairly quiet” November for REITs and other asset classes.

The total returns of the FTSE/NAREIT All REIT Index fell 0.3 percent in November, while the S&P 500 Index gained 0.3 percent. The yield on the 10-year Treasury note was up 0.1 percent for the month. Case pointed out that mortgage REITs gained 1 percent for the month while producing strong dividend yields.

Through the end of November, REIT total returns for 2015 were up 1.1 percent, while the S&P 500 Index was up 3.0 percent.

“I think investors are in a holding pattern, waiting to get more information about the course of the macroeconomic expansion and the intentions of the Federal Open Market Committee,” Case said.

Among the sectors that did gain ground in November, timber REITs gained 13.5 percent, while the self-storage sector gained 4.5 percent and the apartment sector advanced 3.4 percent. Case noted that the timber sector lagged the rest of the industry earlier in the year. Meanwhile, the self-storage and residential sectors have been among the stronger performers this year, according to Case.

Case mentioned that some investors view REITs as undervalued, especially relative to valuations in the private market.

“Part of the reason that people think REITs may be undervalued is that so little has happened during the year, with REITs up only 1 percent on the year, even though we’ve continued to have stronger news about the macroeconomic situation,” he said.