REITs Outperform Broader Equity Market in First Half of 2010

U.S. Equity REITs Up 5.56%; S&P 500 Down 6.65% during same period

Real estate rebounds in a big way. The U.S. REIT industry significantly outperformed the broader equity market in the first half of 2010, despite global economic shocks that depressed the market in the second quarter, according to the National Association of Real Estate Investment Trusts (NAREIT).

Both the FTSE NAREIT All REITs Index, the broadest U.S. REIT index, and the FTSE NAREIT Equity REIT Index were up 5.56% on a total return basis in the first half, while the S&P 500 was down 6.65%. In the second quarter, the FTSE NAREIT All REITs Index was down 3.66% and the FTSE NAREIT Equity REIT Index was down 4.06%, while the S&P 500 tumbled 11.43%.

Over longer time frames REITs outperformed the broader equity market by even wider margins. On a one-year basis ended June 30, the FTSE NAREIT All REITs Index delivered a total return of 53.54%, and the FTSE NAREIT Equity REIT Index was up 55.98%, compared to a 14.43% gain for the S&P 500.

On a 10-year basis, the FTSE NAREIT All REITs Index achieved a compound annual total return of 10.23%, and the FTSE NAREIT Equity REIT Index delivered 10.71%. By comparison, the S&P 500's compound annual total return over the same period was a negative1.59%.

Nearly all segments of the U.S. REIT marketplace outperformed the broader market in the first half of 2010. However, the best performing segments were Apartments, up 16.29%; Lodging/Resorts, up 10.76%; and Self Storage, up 9.48%.

All segments of the U.S. REIT market outpaced the broader equity market for both one-year and 10-year periods ended June 30. On a one-year basis, the leading REIT market segments were Regional Malls, up 78.93%; Apartments, up 76.54%; and Office, up 66.04%.

On a 10-year, compound annual rate basis ended June 30, the Healthcare segment delivered a total return of 20.11%; Self Storage delivered 17.77%; and Regional Malls delivered 13.26%.

Read a story about non-traded REIT offerings from the archives of InvestmentAdvisor.com.

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