U.S. equity REITs capped off a disappointing 2018 with an 8.2 percent drop in December, according to the FTSE Nareit Equity REITs Index, with every property sector or subsector recording a decline. By comparison, the S&P 500 Index fell 9.2 percent in December as part of an overall decline in equities.
Industry watchers have pointed to rising interest rates, economic uncertainty in China and the ongoing trade war as possible drivers of the poor performance. The stock market shakiness in the fourth quarter led to full-year declines for listed real estate. Equity REITs had a full-year total return of –4.6 percent in 2018, similar to the S&P 500 Index’s full-year total return of –4.4 percent.
The worst-performing property sector was timber, which fell 16.0 percent in December and 32.0 percent over the full year. The decline may reflect trends in construction and commodities pricing.
In 2018, the best-performing property sectors were freestanding retail, with a return of 13.9 percent, and manufactured homes, with a return of 11.4 percent. In addition, infrastructure (7.0 percent), healthcare (7.6 percent), apartments (3.7 percent) and self-storage (2.9 percent) finished the year in positive territory.
