WASHINGTON, DC-REITs experienced their fair share of turmoil last month thanks to the unusual macroeconomic and political events. The end result, according to NAREIT figures just posted on the association’s website: the FTSE NAREIT All REIT Total Returns Index fell 5.06% for the month. They still managed to slightly outperform the broader markets, as the S&P 500 was down 5.43% and the Russell 2000 Total Return Index down 8.7%. NAREIT did not return a call from GlobeSt.com in time for publication.

On a year to date basis, the FTSE NAREIT All REIT Total Returns Index is up close to 5%, while the S&P 500 has fallen approximately 2%. The recovery from the beginning of the month is all the more notable as REITs were harder hit than other asset classes when the equity markets plunged following Standard & Poor’s downgrade of US credit.

The S&P 500 dropped more than 6%, while REITs fell nine percentage points, according to the SNL US REIT Equity Index--the largest decline since December 2008 when the index fell 19.3% and 15.2%, the research analyst firm said.

In the article posted on Reit.com, Brad Case, NAREIT’s senior vice president for research and industry information, points to investors’ concerns about the political situations in the United States and Europe as one of the drivers behind REITs’ performance last month.  "August was a difficult month for investors, with concerns about political leadership in Washington and Europe resurrecting fears of economic weakness," Case said. "The fact that REITs again outperformed the rest of the stock market reinforces both investors’ confidence in REIT earnings growth and the importance of REITs as a portfolio diversifier."

However there are growing signs that fundamentals in the commercial real estate market are beginning to struggle. Last week, the National Association of Realtors reported that commercial real estate vacancy rates are flat and only likely to improve modestly in the coming year. "Disappointing economic growth in recent months means a slower recovery for most of the commercial real estate sectors, although multifamily housing continues to benefit from pent-up demand resulting from an abnormal slowdown in household formation in recent years," Lawrence Yun, NAR chief economist, said in a prepared statement.