REITs Post Solid Earnings Growth in 4th Quarter of 2016

Calvin Schnure

From an operating standpoint, REITs posted a strong performance in the fourth quarter of 2016, according to the latest data available from NAREIT’s T-Tracker.

Notably, funds from operations (FFO) grew 7.5 percent from the previous quarter and 20.5 percent from the year-earlier period. Nine of 11 REIT sectors saw a quarterly increase in FFO.

Calvin Schnure, NAREIT’s senior vice president for research and economic analysis, discussed the results in a video interview with REIT.com. “We’re seeing strong earnings growth pretty much across the board among REITs,” Schnure said.

According to Schnure, the results weren’t surprising. He pointed out that demand growth has outpaced the volume of new space coming online. Net absorptions also outpaced completions across most property sectors.

Importantly, Schnure noted that occupancy rates hit a record high in the fourth quarter of 94.5 percent. “That’s a really solid fundamental supporting earnings growth going forward,” he said.

The fourth quarter of 2016 was the first to reflect the effects of real estate’s move to a headline sector under the Global Industry Classification Standard (GICS). Schnure highlighted the fact that the growth of real estate earnings during the quarter was second only to the consumer discretionary sector.