Industry Performance

Favorable economic trends and solid operating fundamentals support REIT industry’s growth.

mREITs led the performance of the overall U.S. REIT market in 2017, with the FTSE Nareit Mortgage REITs Index delivering a 19.79 percent total return for the year

We decided to turn the tables and ask investors and other readers of the Nareit News Digest for their views on what will have the greatest impact on REIT share performance in 2018.

REIT share prices have often responded negatively to rising interest rates, at least since 2013. Is this warranted by the outlook for their future earnings?

For REIT investors 2017 turned out to be a very normal year—but that was a huge disappointment given the “irrational exuberance” that investors in some other parts of the stock market enjoyed. So how can we develop empirically-based REIT return expectations for 2018?

Concern is growing among some investors that tight labor markets may trigger an increase in price inflation. 

Cap rates have been holding their ground, even as interest rates move higher. The resilience of pricing in the real estate sector should not be surprising, however, given the strength in the fundamentals that support demand for commercial space.

One of the enduring mysteries of reporting on investments is how many people seem to focus on price appreciation OR income, and how few people focus instead on total return

REITs have steadily fortified their balance sheets, leaving the industry in as solid a financial position it has ever seen, based on more than two decades of data available.

The fundamentals for the REIT industry remain firm, which gives us some confidence that the recent decline in FFO is a short-term dip amidst a longer-term trend of mostly solid growth.