REIT Returns Flat in April

REITs returns ended flat in April as investor uncertainty late in the month diminished earlier gains, market watchers said.

 The total returns of the FTSE NAREIT All REITs Index gained 0.5 percent in April, while the S&P 500 posted a return of 1.0 percent. Total returns of the FTSE/NAREIT All Equity REITs Index gained 0.4 percent in April. The FTSE NAREIT Mortgage REITs Index produced a total return of 3.5 percent. The yield on the 10-year Treasury note dropped 0.1 percent for the month.

Brad Case, NAREIT senior vice president for research and industry information, noted that the final numbers for April are not indicative of how REITs performed for most of the month.

“Mostly it was a month of good news for REITs, then right at the end of the month, it turned negative,” Case said.

Meanwhile, Roy Shepard, senior analyst at Edward Jones, said the REIT market’s performance in April was indicative of a “volatile” earnings season.

“There were some disappointing results for some companies that, at least to me, indicates that maybe we’re getting later in the [real estate] cycle,” Shephard said.

Turning to individual property sectors, Case noted that April was a month “with some real disparities.”

Data center REITs led the industry with returns of 5.9 percent in April. Industrial REITs followed close behind with returns of 5.5 percent.

Mortgage REITs performed well, Case said, especially those that provide financing for home mortgages.

Retail REIT returns, however, dropped 4.0 percent during the month. Case pointed out that investors are still working to determine which retail real estate owners are best positioned to manage the disruption in the retailing business.

“The market has to sort out who owns the real estate that’s going to be affected by retail weakness and who is going to be more resilient,” Case said.  He added that because retail REITs typically own high-quality assets, they “have less to worry about” than many retail real estate owners.

Looking more broadly, Case said he expects the steady improvement in macroeconomic fundamentals to continue. Case also noted that REITs continue to offer strong dividend yields, while the industry overall trades at a “fairly significant discount.”