The MarketsJanuary 5, 2011

REITs Enjoy Strong 2010 Performance

U.S. REITs outperformed the broader equity market in 2010, matching their gains in 2009, according to the National Association of Real Estate Investment Trusts (NAREIT).

Reported by Fred Schneyer

A NAREIT news release said the FTSE NAREIT All Equity REITs Index delivered a total return of 27.95% in 2010 and the FTSE NAREIT All REITs Index gained 27.58% compared to 15.06% for the S&P 500. REITs’ 2010 returns came on top of 2009 gains of 27.99% for the FTSE NAREIT.

The 10-year compound annual total return of the FTSE NAREIT All Equity REITs Index was 10.76% compared to 1.41% for the S&P 500. Additionally, equity REITs outperformed the S&P 500 over the past 1-, 3-, 5-,10-, 15-, 20-, 25-, 30- and 35-year periods, delivering double-digit gains in seven of those nine periods, NAREIT said.

At year-end 2010, the equity market capitalization of the U.S REIT industry had increased to $389 billion, up 44% from $271 billion at the end of 2009, but still trailing that of the peak year of 2006, when equity market capitalization reached $438 billion at year-end.

All sectors of the U.S. REIT market delivered positive returns in 2010, and all but two sectors produced strong, double-digit returns. Top performing industry segments for the year were Apartments, up 47.04%; Lodging/Resorts, up 42.77%; and Commercial Mortgage Financing, up 41.99%. Retail REITs were up 33.41% for the year; Industrial REITs were up 18.89%; and Office REITs were up 18.41%.

The U.S. listed property market outperformed other segments of the global listed property market in 2010. The North America segment of the FTSE EPRA/NAREIT Global Real Estate Index Series delivered a 28.65% total return for 2010 compared to total returns of 17.21% for the Asia segment and 9.23% for the Europe segment.

Yield-seeking investors also benefited from REITs’ performance in 2010. The FTSE NAREIT All REITs Index’s yield at year-end was 4.23% compared with 3.3% for 10-year U.S. Treasuries.

According to NAREIT, REITs continued to raise public equity and debt at a rapid pace in 2010. “In a commercial real estate marketplace in which many private owners have continued to find it difficult to raise capital to restructure highly leveraged balance sheets, REITs again demonstrated their cost-effective access to capital through the public markets,” said NAREIT President and CEO Steven A. Wechsler, in a news release.