Mortgage REITs delivered a 19.8% total return for 2017, the top performance of the overall U.S. REIT market, Nareit reported this week.
Among mREITs, the home financing segment had a 23.3% total return last year, while the commercial financing segment gained 9.1%.
The FTSE Nareit All REITs Index, which comprises mREITs and equity REITs, delivered a total return of 9.3% for the year with a 2.4% gain for the fourth quarter. The S&P 500’s total return for 2017 was 21.8%, with a gain of 6.6% in the October-to-December quarter.
Nareit president and chief executive Steven Wechsler said in a statement that the total U.S. REIT market’s 2017 performance, as measured by the FTSE Nareit All REITs Index’s total return, was representative of the market’s long-term performance.
“Since the beginning of 1972, when the index was created, its average annual return has been 9.72%,” Wechsler said. “Over the longer term, REITs have been a remarkably consistent investment, delivering solid long-term performance and consistent income for their shareholders.”
Wechsler noted that the broader equity market’s performance was driven by large-cap growth stocks in 2017 — primarily companies in the information technology industry, with the S&P 500 Information Technology Sector returning 38.8%.
Equity REIT Property Segments Shine
The FTSE Nareit All Equity REITs Index’s total return last year was 8.7%, with a 2.5% gain in the fourth quarter. About half of all equity REIT market segments had double-digit total returns in 2017, it said.
The infrastructure sector, whose largest companies are cell phone tower REITs, led the equity REIT market’s performance with a 35.4% total return for the year. It was followed by:
- Data centers with a 28.43% return
- Manufactured home communities with a 21.9% gain
- Timber REITs with 21.9%
- Industrial REITs with 20.6%
- Single-family home REITs with 17.5%
- Specialty REITs with 13.2%
Four trends are driving equity REIT valuations, according to one portfolio manager.