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).

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.