Research - MAY 4, 2017

U.S. REITs return 0.4% in April

by Loretta Clodfelter

Equity REITs struggled in April, with a total return of 0.43 percent in the month, according to the FTSE NAREIT All Equity REITs Index. Year-to-date, the REIT index has provided a total return of 2.99 percent, and the index returned –1.57 percent in March.

Performance in April was pulled down by the retail sector, which fell 4.02 percent. All retail subsectors saw declines in the month, with shopping centers, regional malls and freestanding retail returning –5.01 percent, –4.11 percent and –1.95 percent, respectively. The retail property sector is facing challenging headwinds, including a rise in retailer bankruptcies and an ongoing shift toward online shopping. Year-to-date, retail REITs have dropped 8.58 percent.

By contrast, Internet technology is provided a boost for the top-performing property types in April — data centers, which returned 5.90 percent, and industrial, which returned 5.47 percent. While e-commerce has created headwinds for retail property, it has provided a tailwind for the industrial sector. Data centers are the best-performing REIT property type year-to-date, with a total return of 18.03 percent. A wide range of trends in the technology industry — cloud computing, mobile devices, machine learning, software as a service and the Internet of Things — are all increasing the need for data storage and driving growth in the data center industry.

Trading in the REIT sector has increased over the past decade. The FTSE NAREIT All Equity REITs index has an equity market capitalization of $986 billion, and the average daily dollar trading volume in REITs was $7.2 billion in April — nearly double the average daily dollar trading volume in April 2012 of $3.7 billion and more than twice the $2.9 billion volume in April 2007.

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