Real estate returns in March recouped some of their January and February losses, Nareit reported Friday.
The FTSE Nareit All REITs Index, which comprises both equity and mortgage real estate investment trusts, had a total return of 3.74% in March. The FTSE Nareit All Equity REITs Index climbed 3.71%, and the FTSE Nareit Mortgage REITs Index delivered a 6.54% total return.
The S&P 500’s total return, in comparison, fell 2.54% in March.
“Investors in the past month have become more aware of the value proposition real estate offers relative to other segments of the stock market,” Nareit’s president and CEO, Steven Wechsler, said in a statement. “The REIT industry is continuing to generate earnings and dividends growth.”
Wechsler noted that occupancy rates have reached record highs and leverage is at its lowest level in more than two decades, equipping REITs to continue delivering earnings growth in a rising interest rate environment.
BMO Capital Markets analyst John Kim told Nareit that REITs had found favor late in March as investors viewed the sector as less volatile than other parts of the broader market, particularly the technology sector.
Kim said investor perception that the yield on the 10-year Treasury note had now stabilized also supported REIT performance.
In the first quarter, the total returns of the FTSE Nareit All REITs Index and the FTSE Nareit Equity REITs Index fell 6.66%, while the FTSE Nareit Mortgage REITs Index was down 4.06%. The total return of the S&P 500 fell 0.76% in the January-to-March period.
In 2017, mREITs topped the U.S. REIT market with a total return of 19.8%.
Equity and mREITs Performance
Apartment REITs posted a 7.39% gain in March to lead the REIT market, according to the report.
Matt Kopsky, an analyst at Edward Jones, told Nareit that a few apartment REITs had reported favorable trends for the first two months of the year, helping the group overall. Kopsky said continued construction delays to start the year may smooth out new deliveries in 2018.
These other equity REIT market segments also outperformed the FTSE Nareit All Equity REITs Index:
- Data centers, up 6.35%
- Health care, up 5.89%
- Free-standing retail, up 5.12%
- Manufactured homes, up 5.05%
- Lodging/resorts, up 4.63%
- Industrial, up 4.59%
- Single-family homes, up 4.59%
- Self-storage, up 4.36%
- Infrastructure, up 3.75%
Among mortgage REITs, home financing mREITs were up 7.29% in March, and commercial financing REITs climbed 4.46%.
Three REIT market segments delivered total returns that outperformed the S&P 500’s 13.99% on a one-year trailing bases: infrastructure, up 22.27%; industrial, up 17.33%; and manufactured homes, up 16.07%.
Income investors enjoyed impressive dividend yields at the end of March: FTSE Nareit Mortgage REITs Index, 10.47%; home financing REITs, 11.33%; and commercial financing REITs. 8.08%.