US REITs outperformed broader equity market in first half of 2010, according to latest industry report

Written by Ray Clancy

Tuesday, 13 July 2010 10:39

The US real estate investment trust (REIT) industry significantly outperformed the broader equity market in the first half of 2010, despite global economic volatility, a new report shows.

The FTSE NAREIT All REITs Index, the broadest US REIT index, and the FTSE NAREIT Equity REIT Index were up 5.56% on a total return basis in the first half, while the S&P 500 was down 6.65%, the report from the National Association of Real Estate Investment Trusts shows.

In the second quarter, the FTSE NAREIT All REITs Index was down 3.66% and the FTSE NAREIT Equity REIT Index was down 4.06%, while the S&P 500 tumbled 11.43%, it also shows.

But over the longer term REITs outperformed the broader equity market by even wider margins. On a one year basis ending in June 2010, the FTSE NAREIT All REITs Index delivered a total return of 53.54%, and the FTSE NAREIT Equity REIT Index was up 55.98%, compared to a 14.43% gain for the S&P 500.

Over 10 years, the FTSE NAREIT All REITs Index achieved a compound annual total return of 10.23 %, and the FTSE NAREIT Equity REIT Index delivered 10.71%. By comparison, the S&P 500’s compound annual total return over the same period was a negative 1.59%.

‘Through their skilled management teams, high quality assets and strong dividends, which over longer periods have accounted for nearly two thirds of total returns, REITs have consistently provided outstanding long-term performance for their investors,’ said NAREIT president and chief executive officer Steven Wechsler.

Nearly all segments of the US REIT marketplace outperformed the broader market in the first half of 2010, the report also shows. The best performing segments were apartments, up 16.29% followed by lodging/resorts, up 10.76% and self storage, up 9.48%.

All segments of the US REIT market outperformed the broader equity market over both one year and 10 years. Aver one year the leading REIT market segments were regional Malls, up 78.93%, followed by apartments, up 76.54% and then Office, up 66.04%.

Over 10 years the healthcare segment delivered a total return of 20.11% while self storage delivered 17.77% and regional malls delivered 13.26%.