Not even a traditionally non-correlated asset such as the real estate investment trust could escape the recent market bloodshed. The REIT market overall was down between 40 percent and 50 percent last fall from its February 2007 peak, according to Anatole Pevnev of REITcafe.com. As of mid-November, the MSCI U.S. REIT Index was down 41 percent for the year. Additionally, Pevnev notes, historically stable REIT prices experienced unprecedented volatility. REIT prices in October were six times more volatile than they had been in June, he says.
Still, in the third quarter, REITs and REIT-like companies did “surprisingly well,” Standard & Poor’s says in its latest Global Property & REIT report. For example, S&P’s U.S. REIT and U.S. Property indices each generated positive returns of more than five percent for the quarter, while the S&P 500 was down about 13 percent. In addition, S&P’s Global REIT index outperformed its Global Broad Market Index in the third quarter, losing 4.4 percent compared to a 16.6-percent drop in the Global BMI.
Fourth-quarter figures may not paint as pretty a picture, however, since third-quarter numbers do not reflect market activity in October and November, when REIT prices were trending lower.