REITs Outgain Broader Market in March

In the latest edition of Quick Study, Brad Case, NAREIT’s senior vice president for research and industry information, said confidence in the state of the economy and capital markets boosted the broader market, and REITs in particular, during March.

“It was the kind of month where equity investors in general did well in essentially all categories of the stock market,” Case said. “But, certainly you were better off if you were a REIT investor,” he added.

The total returns of the FTSE/NAREIT All REIT Index rose 10 percent in March, while the S&P 500 Index added 6.8 percent. For the year to April 1, the total returns of the FTSE/NAREIT All REIT Index were 5.9 percent, while S&P 500 Index returns rose 2.0 percent.

As for specific property segments, “there wasn’t a loser in the entire REIT industry, the gains were very broad based” during March, Case stressed. The largest gains were in the timberland REIT segment, as returns rose nearly 20 percent. Industrial REITs, meanwhile, recorded returns of more than 13 percent.

“There wasn’t a bad place to be in the REIT industry last month, and that mostly holds true for the first quarter as well,” according to Case. He attributed the gains to confidence in macroeconomic and capital market conditions that have produced rent growth, lower vacancy rates and higher income for REIT investors.

Meanwhile, Case said recent talk of market volatility may have been overblown.

“There was more discussion about volatility in the REIT market than was warranted,” he said. An increase in volatility occurred in late January and the first half of February, but that has now gone, Case noted.

“REIT volatility is back to approximately its normal level,” Case said. He added that REIT stocks are typically less volatile than non-REIT stocks of the same size.