WASHINGTON, DC—Quarterly funds from operations for equity REITs exceeded $15 billion for the second quarter, marking the first time FFO reached this milestone, NAREIT said Tuesday. FFO for Q2 was up 7.9% from Q1 and 7.3% from the year-ago period, according to NAREIT's T-Tracker, a quarterly composite performance measure of US listed REITs. The new milestone occurs just three years after quarterly FFO broke the $10-billion barrier.

“This quarter's T-Tracker results show a healthy REIT industry, with near-record occupancy rates,” says Steve A. Wechsler, NAREIT's president and CEO. Q2 occupancy rates across the REIT spectrum came in a 93.4$, just below the record of 93.7% in Q3 and Q4 of last year, with retail REITs exceeding the average at 95.2% occupancy. Wechsler adds that the growth in REIT FFO was driven by “a combination of new REITs entering the market, asset acquisitions, and organic growth of properties held by existing REITs.”

Some REIT sectors outperformed the average Y-O-Y FFO increase by a substantial margin. Industrial REITs, for example, were up 13.9% from Q1 and 20.9% from the year-ago period. The sector's same-store NOI was up 4.8% Y-O-Y, above the industry-wide average increase of 3.3%.

Diversified REITs saw a 12.2% rise in FFO from Q1 and an even bigger annual increase than industrial at 21.3%. Two REIT sectors posted modest quarterly increases in FFO but impressive Y-O-Y gains: data centers, with FFO up 7.0% from Q1 and 12.4% Y-O-Y; and infrastructure, where FFO was up marginally from Q1 with a 2.0% increase but was 38.6% higher than a year ago.

Calvin Schnure, NAREIT's SVP of research and economic analysis, says that high occupancy rates and demand for commercial space drove earnings higher for the REIT industry. In particular, he says, “Retail REITs have been able to sustain occupancy levels by attracting new and more productive tenants to replace those that have left. Retail REITs have paid $9.4 billion in dividends to shareholders over the past four quarters.”

Instant Insights /

REITs' Quarterly FFO Hits Record High

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