Free Standing Retail REITs Deliver Industry’s Top Performance
REITs outperformed the S&P 500 while simultaneously outpacing the Russell 2000.
WASHINGTON, DC—Delivering a 13.93% total return for the year, free standing retail REITs were the top performing segment of the U.S. REIT market in 2018. Manufactured homes segment also posted a 11.43% return.
Weathering a volatile year for all stock investors, REITs outperformed the S&P 500 while simultaneously outpacing the Russell 2000.
“No one really knows why the market values some companies over others in similar businesses. But one thing we do know is that both of these property segments produced strong operating results,” says Ronald C. Kuykendall, Vice President, Media & Public Relations.
The Free Standing Retail segment’s net operating income in the third quarter of 2018 (the latest quarter for available data) was up 10% from the third quarter of 2017. The Manufactured Homes segment’s NOI was up 11% over the same period. The FTSE Nareit All Equity REITs Index, the index for the U.S. equity REIT market, was also up 4.8%.
These two segments also delivered stronger growth in dividend payouts than the equity REIT industry as a whole. The Free Standing Retail segment’s dividend payout in the third quarter of 2018 was up 16% over the same quarter the prior year. The Manufactured Home segment’s dividend payout increased by 7% over the same period. The dividend payout growth for the FTSE Nareit All Equity REITs Index was 6% over the same period, Kuykendall tells GlobeSt.com.
In addition to the outperformance of the free standing retail and manufactured home market segments, five other segments of the REIT market had positive total returns. Health care REITs delivered a 7.58% return, followed by infrastructure REITs with 6.99%, apartment REITs with 3.70%, and self-storage REITs with 2.94%. The commercial financing mortgage REIT segment also produced a 3.51% total return.
“One likely reason REITs outperformed the broader equity market in 2018 is that they were oversold and undervalued earlier in the year. Investors realized the value opportunity and began moving back into REITs in mid-year,” says Kuykendall.
REITs collectively own more than $3 trillion in gross assets across the country, with stock-exchange listed REITs owning approximately $2 trillion in assets. U.S. listed REITs also have an equity market capitalization of more than $1 trillion. Additionally, more than 80 million Americans invest in REIT stocks through their 401(k) and other investment funds.