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REITs going strong with room to grow

08/17/2012

As of July 31, most sectors of the U.S. REIT market tracked by the National Association of Real Estate Investment Trusts (NAREIT) produced double-digit returns year to date. U.S. REITs as a whole continued to significantly outpace the broader equity market for the first seven months of the year, with the FTSE NAREIT Equity REITs Index gaining 17.15% versus 11.01% for the S&P 500®. For the one-year period, the REIT index was up 13.38% compared to the S&P’s gain of 9.13%.

Not surprisingly, I am constantly asked, “Is there any upside left in the real estate market?” As I recently told The Wall Street Journal, I believe REITs still offer growth potential for investors regardless of which way the U.S. economy goes. If growth picks up, REITs that focus on hotels, apartments, and storage units should fare well, as these properties typically have shorter-term leases and can quickly raise rents to capitalize on rising demand. On the other hand, high-quality shopping malls tend to hold up better in a slowing economy. Incidentally, year to date through July, retail was the top-performing REIT sector with a 23.57% total return, led by the regional mall subsector, which produced a 25.11% return.

Virtus Investment Partners provides this communication as a matter of general information. The opinions stated herein are those of the author and not necessarily the opinions of Virtus, its affiliates or its subadvisers. Portfolio managers at Virtus make investment decisions in accordance with specific client guidelines and restrictions. As a result, client accounts may differ in strategy and composition from the information presented herein. Any facts and statistics quoted are from sources believed to be reliable, but they may be incomplete or condensed and we do not guarantee their accuracy. This communication is not an offer or solicitation to purchase or sell any security, and it is not a research report. Individuals should consult with a qualified financial professional before making any investment decisions.