REIT Returns Bounce Back in July

WASHINGTON, DC—REITs got some wind back in their sails in July as chatter over impending interest rate increases died down, NAREIT reported this week. Total returns for NAREIT's indices of stock-exchange traded REITs beat S&P indices by more than double in some instances, according to data issued Thursday.

The FTSE NAREIT All REITs Index, which covers both equity and mortgage REITs, gained 4.85% in July on a total return basis. The FTSE NAREIT All Equity REITs Index was up 4.99% for the month, and the FTSE NAREIT Mortgage REITs Index was up 3.03%. In comparison, the S&P 500's total return was up 2.10% in July, and the S&P Composite 1500 returned 1.84%.

Year to date through July 31, though, the REIT sector's total returns represented another decline, although dividend yields outperformed those of the S&P indices and some individual property types posted gains in returns. YTD total returns for the All REITs, All Equity REITs and Mortgage REITs indices decreased 0.64%, 0.73% and 2.22%, respectively. For the S&P 500 and Composite 1500s, YTD total returns rose 3.35% and 3.44%, respectively.

On July 31, the dividend yield for the All REITs Index was 4.14%, that of the All Equity REITs Index was 3.70% and that of the Mortgage REITs Index was 11.14%. All three easily beat the S&P 500 and Composite 1500 indices, which posted YTD yields of 2.11% and 2.04%, respectively.

By property type, self-storage and residential REITs fared best on total returns during July and YTD. Self-storage led with an 11.54% total return for July and a 15.69% total return for the year through July 31. The manufactured homes segment of the residential REIT sector was second with total returns of 10.72% for July and 14.87% YTD, while apartment REITs delivered a 6.14% return in July and 7.01% for the year through July 31.

July's monthly gains followed a quarter of declines. “The whole peer group snapped back pretty strongly this month,” Jeffrey Langbaum, senior REIT analyst at Bloomberg Intelligence, told REIT.com. And Ki Bin Kim, analyst with Sun Trust Robinson Humphrey, told the publication that “You've had a little bit of the noise from interest rates quieting down.”