Investors of all types are realizing the benefits of portfolio diversification, strong and reliable income generation, long-term performance, liquidity and transparency that REITs and other listed real estate provide
Washington, DC (Vocus) January 2, 2007
The National Association of Real Estate Investment Trusts (NAREIT) reported today that the primary U.S. REIT index delivered a total return of 34.35 % for 2006, outperforming all other major U.S. equity market benchmarks for the seventh straight year. NAREIT, http://www.nareit.com, said the 2006 performance of the FTSE NAREIT All REITs Index exceeded the S&P 500 at 15.79%, the Dow Jones Industrials at 16.29%, the Russell 2000 at 18.37% and the NASDAQ Composite at 9.52%.
For the complete data, please see the PDF file attachment at right.
Strong fundamentals across all sectors of the U.S. commercial real estate economy; increasing portfolio allocations to commercial real estate through REITs, especially among large institutional investors; a number of mergers and acquisitions; and steady economic growth fueled the industry's market leading performance over the past year, NAREIT said.
Top-performing REIT industry sectors and their total returns for 2006 included the Office segment, at 45.22%; Health Care, at 44.55%; Self-Storage, at 40.95%; and Apartments at 39.95%. According to the association, the Office segment benefited from steady economic growth, which increased employment and demand for office space, coupled with limited new construction, as well as significant acquisition activity. The Health Care sector continued to benefit from the aging demographic profile of the U.S. population, producing demand for the senior housing and medical care facilities provided by the companies in the sector. The Self-Storage and Apartment segments of the market benefited from reduced affordability of single-family housing, which led many consumers to defer purchases of single-family homes in the past year and choose to rent apartments instead.
"We obviously are pleased by our industry's investment performance in 2006 and over the past seven years," said NAREIT President and CEO Steven A. Wechsler, "but we believe it is equally important to recognize that the performance of REITs is a long-running story. The U.S. REIT industry has outperformed other major benchmarks of U.S. equities for the past 35 years."
Wechsler pointed out that $10,000 invested in the FTSE NAREIT All REITs Index 30 years ago would be worth $434,815 today. By comparison, $10,000 invested at the same time in the S&P 500 Index would be worth $339,718 today.
He also noted that approximately two-thirds of the REIT index's 12.72% average annual total return over the past 20 years was delivered in the form of dividends, a characteristic that makes REITs important components of institutional and individual retirement portfolios.
NAREIT said that pension funds have boosted their allocations to commercial real estate each year for the past five years, and that the funds increasingly are including REITs in their real estate allocations. NAREIT also said that the incidence of real estate investment funds in 401(k) programs has tripled in the last five years.
"Investors of all types are realizing the benefits of portfolio diversification, strong and reliable income generation, long-term performance, liquidity and transparency that REITs and other listed real estate provide," Wechsler said.
Matthew Bechard or Ronald Kuykendall