WASHINGTON, DC—REITs continued their strong performance in January, outstripping the S&P 500, according to NAREIT figures. The bigger question—one that has been asked repeatedly but is becoming more urgent--is how will REITs fare when the Federal Reserve starts to allow interest rates to rise. NAREIT Senior Vice President of Research and Industry Information Brad Case tackles this question in a video interview on NAREIT's website.

First, though, the January results.

The FTSE-NAREIT All REITs Index delivered a total return of 5.59% and a dividend yield of 3.66% in January 2015. Meanwhile, the S&P 500 index declined by 3% for the month, and yielded 2.07%.

Not all REITs hit these numbers, though. The FTSE-NAREIT Mortgage REITs Index declined 0.46% on a total return basis, with dividend yield of 10.65%, for the month. Other asset classes, namely self-storage and healthcare, led the growth in the sector.

One question dogging REITs is how these securities will perform when interest rates inevitably rise this year. It is a fair question: there is a strong inverse relationship between higher interest rates and REIT returns. One common piece of advice for investors is to more carefully vet their REIT holdings for companies that are very sensitive to interest rate increases.

There are other nuances to consider in this discussion, Case says. Macroeconomic fundamentals indicate that demand for commercial real estate will continue to increase. Also, the commercial real estate cycle is far longer than the typical bull market, as it is driven by the supply side. "And right now we are still below even normal levels of new construction," he says. "The commercial real estate cycle is 18 years and we are only about eight years into this cycle."