The listed REIT industry continues to grow and prosper. Total Funds from Operations (FFO) of listed Equity REITs rose 7.9 percent in the second quarter, to $15.6 billion, according to the NAREIT T-Tracker®. This was the first time that the REIT industry FFO exceeded $15 billion, and followed just three years after the industry broke the $10 billion mark in the second quarter of 2014.
What accounts for the industry’s remarkable growth? In a word, results. REITs, which provide both small and large investors a low cost, expertly managed and liquid way to invest in income-producing real estate, have had consistent performance in FFO, net operating income (NOI) and dividends paid. FFO has increased at a 16 percent annual rate over the past five years, and at a 10 percent rate over the past decade (table). Growth of NOI and dividends paid have followed similar upward trajectories.
Listed REITs have paid impressive cumulative total dividends to investors over the years and decades. Over the past four quarters, Equity REITs and Mortgage REITs together paid nearly $52 billion in dividends (lower section of table). Over the past decade the total dividends exceeded $300 billion, and since the beginning of the Modern REIT Era in 1992, investors have received close to half a trillion dollars in dividends from REITs.
There have been three sources of growth of the REIT industry’s FFO and NOI:
New REITs are forming. The REIT approach to real estate investment has proven to be efficient and flexible, and has attracted over 200 firms that elected to be publicly listed REITs (chart; green bars show the growth of NOI due to REIT IPOs and conversions to REIT status);
Existing REITs are expanding. Another advantage of the REIT model is access to capital to fund acquisition of investment properties. The expansion of real estate holdings of existing REITs has made steady contributions to rising NOI (red bars);
Earnings are rising on properties owned. Rising rents and occupancy rates boost income on the properties owned by REITs (growth of same store NOI is shown in the blue bars).
The REIT industry continues to expand. Net acquisitions by REITs totaled $7.7 billion in the second quarter. Gross acquisitions rose to $18.6 billion, the highest total since 2016:Q2, while dispositions edged down to $10.9 billion (chart, gross acquisitions in blue bars, dispositions, red bars, and net acquisitions in black line). Sectors with significant net acquisitions include Data Centers, Health Care, Residential, Specialty, Self Storage and Diversified, while Industrial REITs were net sellers. The gross acquisitions and dispositions of the Office, Lodging and Resorts and Retail sectors were roughly balanced.
For more information on REIT industry operating performance, including spreadsheets and charts for download, please visit the NAREIT T-Tracker webpage.
Contact Clavin Schnure at cschnure@nareit.com.