WASHINGTON, DC—REITS took a half-step backward in the third quarter, with funds from operations declining 4.5% from Q2's record levels to $14.8 billion, Nareit said Tuesday. On a year-over-year basis, though, the total FFO for listed REITs was up 7.8%, and other Q3 metrics represented gains.

Nareit's quarterly Total REIT Industry Tracker Series showed that occupancy rates for all equity REITs rose 50 basis points in Q3, achieving a record high of 94.0% across the industry. For retail REITs in particular, the 50-bp increase brought 95.7%.

Accordingly, same-store NOI was up from the year-ago period, although the 3.2% Y-O-Y gain was little changed from Q2's increase of 3.3%. REIT segments posting the highest levels of SSNOI growth from the year-ago period included manufactured homes (7.1%); diversified (7.0%); single-family homes (6.8%); and industrials (4.7%). Total NOI dipped 1.5% from Q2, although Q3 NOI was up 6.9% from a year ago.

“The REIT industry delivered stable operating results in the third quarter, with total FFO of nearly $15 billion, high occupancy rates and year-over-year growth of same-store NOI,” says Steven A. Wechsler, president and CEO of Nareit. “This sound operating environment is enabling REITs to reward investors with a growing level of dividends.” Dividends paid by equity REITs and mortgage REITs totaled $12.8 billion, an increase of 0.6% from Q2 and 4.1% from Q3 2016.

“REITs have strengthened their balance sheets by raising $38 billion of common and preferred equity in the first three quarters of 2017, which exceeds the full-year total equity capital raised for the past several years” says Calvin Schnure, Nareit's SVP of research & economic analysis. “Total shareholder equity has risen to 44.5 percent of total assets, more than 12 percentage points higher than a decade ago. These solid positions help make REITs a stable investment while also preparing for future growth.”

Instant Insights /

REIT FFO Ebbs from Q2's Record High

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