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REIT share prices came under pressure in October with concerns of rising interest rates bearing down on the market, according to analysts. However, REIT returns continued to lead the S&P 500 through the first 10 months of the year.
The total returns of the FTSE/NAREIT All REIT Index dropped 4.9 percent in October, while the S&P 500 index lost 1.8 percent.
REIT gains were in line with the broader market in July, but on a year-to-date basis, REITs have far outpaced the S&P 500 Index as investors continue to search for yield, analysts said.
The FTSE/NAREIT All REIT Index had a total return of 3.9 percent in July, while the S&P 500 Index gained 3.7 percent. For the year through the end of July, the total return of the FTSE/NAREIT All REIT Index was 18.1 percent, while the S&P 500 Index posted a total return of 7.7 percent. The yield on the 10-year Treasury note dropped 0.8 percent in the first seven months of 2016.
REITs outpaced the broader market in May, as near-term fundamentals remain positive and capital continues to flow into the sector, analysts said.
The FTSE/NAREIT All REIT Index had a total return of 2.3 percent in May, while the S&P 500 Index gained 1.8 percent. For the year to May 31, the total return of the FTSE/NAREIT All REIT Index was 6.5 percent, while the S&P 500 Index posted a total return of 3.6 percent. The yield on the 10-year Treasury note fell 0.4 percent during the first five months of the year.
Real estate industry professionals expect REITs to outperform the S&P 500 Index during the next 12 months, according to a poll from BMO Capital Markets.
The poll of attendees at the BMO Capital Markets 10th Annual North American Real Estate Conference in Chicago shows that 45 percent of institutional investors expect REITs to outperform the S&P 500 Index by more than 3 percent in the next year, while 35 percent said REITs could outperform the benchmark by as much as 10 percent.