REIT Market Rebalancing in April

In the latest edition of Quick Study, Brad Case, NAREIT’s senior vice president for research and industry information, said recent trends in the REIT market reversed somewhat during April.

The total returns of the FTSE/NAREIT All REIT Index fell 1.7 percent in April, while the S&P 500 Index added 0.4 percent.

“You could characterize April as a rebalancing month, where some of the sectors that have outperformed recently underperformed. Overall, it wasn’t a month of very large movements,” Case said.

As for the real estate market’s underlying fundamentals, Case said the outlook remains upbeat.

“The picture looks very strong,” he said, with the performance of REIT-owned assets bolstered by solid occupancy rates and rent growth.

“When you look at the underlying macroeconomic conditions, there’s growing evidence that the economic recovery is going to continue, although it’s going to continue to be soft and steady. That’s a good environment for REIT investing,” Case said.

New construction remains “way below average levels,” according to Case, which means “overall market conditions are quite favorable.” The impact of constrained supply has already been seen in REIT’s earnings reports from the first quarter, according to Case: “They’ve been strong in terms of funds from operations and other measures of the fundamental earning capacity of the assets they own.”