REIT shares are trading at a 4% discount to net asset value, according to the LaSalle Investment Management report.

"US real estate markets are better positioned than in past recessions due to more modest levels of new supply," says William K. Morrill, Jr., managing director and chief executive officer of LaSalle Investment Management Securities. "Investors will continue to view real estate as a safe harbor due to the high dividend yield and positive earnings growth. After outperforming the S&P for two consecutive years, we are hopeful that REITs will provide an encore performance in 2002."REITs should generate double-digit total returns in 2002, given their current 6.5% dividend yield that is at a historic-low payout level of 65%, as well as projected earnings growth of at least 4%, according to LaSalle Investment Management. Those two attributes contributed to REITs' 2001 performance.

"As the economy weakened, corporate earnings slumped and uncertainty spread, investors took refuge in REITS because of their high dividends yield and the perception that earnings growth for this defensive asset class would prove somewhat resilient in an economic downturn," Morrill says. "New funds for REITs came primarily from individual and non-dedicated institutional investors seeking the safety of yield."