U.S. REITs continued to outperform the broader equity market through the first four months of 2016, the National Association of Real Estate Investment Trusts (NAREIT) reported.
The FTSE NAREIT All REITs Index, the broadest measure of the U.S. REIT market including both Equity REITs and Mortgage REITs, delivered a 4.09 percent total return for the first four months of the year. The FTSE NAREIT All Equity REITs Index delivered a 3.92 percent total return for the period, and the total return of the FTSE NAREIT Mortgage REITs Index was 6.05 percent. By comparison, the total return of the S&P 500 in the first four months of the year was 1.74 percent.
Eight Equity REIT property sectors and subsectors outperformed the 3.92 percent total return of the FTSE NAREIT All Equity REITs Index in the first four months of the year. Three property segments delivered double-digit total returns: Specialty REITs were up 16.77 percent; Free-standing Retail REITs were up 14.85 percent; and Data Centers gained 14.14 percent.
Other Equity REIT market segments that beat the index were Timber REITs, up 9.07 percent; Industrial REITs, up 7.71 percent; Infrastructure REITs, up 6.48 percent; Shopping Centers, up 6.31 percent; and Health Care REITs, which gained 4.08 percent.
Stock exchange-listed U.S. REITs continue to offer strong yields for dividend-seeking investors, outpacing the broader equity market. At the end of April, the dividend yield of the FTSE NAREIT All REITs Index was 4.28 percent, the dividend yield of the FTSE NAREIT All Equity REITs Index was 3.86 percent, and the yield of the FTSE NAREIT Mortgage REITs Index was 11.61 percent. In comparison, the dividend yield of the S&P 500 was 2.18 percent.
A number of analysts have noted that increasing construction and high property prices often presage a downturn in the sector, and have asked whether this market cycle may be approaching its 9th inning. NAREIT economists have examined data from several sources to shed further light on the question of whether the real estate sector may be approaching a correction.
Investment real estate values declined by -0.32 percent during April 2016 according to the FTSE NAREIT PureProperty® Index Series, which provides the earliest measurement of changes in the market values of properties held for investment purposes.
At the end of April, the equity market capitalization of the 219 REITs in the FTSE NAREIT All REITs Index was $972 billion and the equity market capitalization of the 165 REITs in the FTSE NAREIT All Equity REITs Index was $914 billion. NYSE-listed REITs accounted for the bulk of the industry’s equity market capitalization: $915 billion. The industry’s average daily dollar trading volume in April was $6.0 billion, nearly double its average daily trading volume five years earlier in April 2011.