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Quick Study: REITs Beat Market in April

Quick Study: REITs Beat Market in April
05/02/2013 | by Allen Kenney

In the latest edition of “Quick Study,” Brad Case, NAREIT’s senior vice president of research and industry information, provided an analysis of the REIT market’s performance in April.

The U.S. REIT market delivered total returns of 5.8 percent in April, according to NAREIT data. That beat the S&P 500, which was up 1.9 percent for the month. The NASDAQ Composite returned 1.9 percent for the month as well.

“It was another strong month for the REIT market in April,” Case said.

Case noted that while the performance of the broader market this year has generated attention, REITs actually outperformed it in the first third of 2013. REITs were up 15.4 percent in the first four months of the year. Meanwhile, the S&P 500 was up 12.7 percent during the same time period.

“That repeats a pattern that we’ve seen over each of the last four complete years, and, of course, over most longer periods of years, the REIT market has outperformed the stock market,” he said.

Case said the retail, infrastructure, self-storage and health care sectors stood out for their performances in April. He also pointed out that mortgage REITs have produced strong returns so far this year. The sector has a total return of 19 percent in 2013 and is offering dividend yields above 10 percent.

“Mortgage REITs have really had a very strong run so far this year,” Case said. “They’ve gained nearly 19 percent in the first four months of 2013. Yet, they still offer dividend yields greater than 10 percent.”

Case attributed the strong showing in the retail sector to “growing confidence” among consumers.

“Really it was a strong month for most of the REIT market,” he added.

Case also discussed the duration of the REIT bull market. He said 18 months have passed since REITs’ recovery from the liquidity crisis was complete. The upswing of the real estate market cycle generally lasts 16 years, according to Case’s research. He added that economic growth supports improvements in REITs’ overall operating performance going forward.