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Research - JULY 12, 2018

REIT returns more than double the S&P 500 in Q2 2018

by Jody Barhanovich

REITs outperformed the broader equity market in second quarter 2018 and the month of June, Nareit reported. The FTSE Nareit All REITs Index, the broadest index of the U.S. REIT market containing both equity and mREITs, delivered an 8.32 percent total return in the second quarter, while the FTSE Nareit All Equity REITs Index gained 8.50 percent and the FTSE Nareit Mortgage REITs Index was up 4.71 percent. By comparison, the total return of the S&P 500 in the second quarter was 3.43 percent.

For the month of June, the FTSE Nareit All REITs Index’s total return was 4.06 percent, the FTSE Nareit All Equity REITs Index delivered a 4.18 percent gain and the FTSE Nareit Mortgage REITs Index was up 1.48 percent. The S&P 500 gained 0.62 percent in the month.

Nine equity REIT property segments delivered second quarter total returns that exceeded the total return of the FTSE Nareit All Equity REITs Index, with six segments delivering double-digit returns.

Self-storage REITs outperformed all other segments with a 15.10 percent total return for the quarter. Total returns of other top-performing segments were:

  • Health Care – 14.21 percent
  • Lodging/Resorts – 14.14 percent
  • Specialty – 12.62 percent
  • Diversified – 12.57 percent
  • Shopping Centers – 12.18 percent
  • Free Standing Retail – 9.74 percent
  • Industrial – 9.35 percent
  • Regional Malls – 9.12 percent

Among mREITs, Commercial Financing REITs provided a 5.56 percent total return in the second quarter and Home Financing REITs returned 4.41 percent.

For investors seeking income, REITs continued to offer attractive dividend yields. On June 30, the dividend yield of the FTSE Nareit All REITs Index was 4.30 percent. The dividend yield of the FTSE Nareit All Equity REITs Index was 3.96 percent, and the dividend yield of the FTSE Nareit Mortgage REITs Index was 10.35 percent, with Home Financing REITs yielding 11.17 percent and Commercial Financing REITs yielding 8.18 percent. By comparison, the dividend yield of the S&P 500 on June 30 was 1.95 percent.

However, capital raising was conservative in second quarter 2018. With REIT shares trading at discounts through much of the second quarter, capital raising was restrained. REITs raised a total of $7.92 billion in public markets in the quarter, including $523 million in one IPO; $1.50 billion in secondary offerings of common shares; $316 million in offerings of preferred shares; and $5.59 billion in unsecured debt. By comparison, in the second quarter of 2017, REITs raised $21.05 billion in public markets, including $765 million in four IPOs; $8.79 billion in secondary common equity; $1.26 billion in preferred shares; and $10.23 billion in unsecured debt.

The publicly listed REIT industry’s average daily dollar trading volume in June was $7.8 billion, up from $6.1 billion in June 2013 and more than double the $3.1 billion average daily dollar trading volume in June 2008.

 

 

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