REIT - The State Of REITs: February 2024 Edition
2024-02-26 02:59:09 ET
Summary
- The REIT sector had a rough start to 2024 with a -5.72% total return in January.
- Large cap REITs (-4.79%) outperformed their smaller peers in January. Micro cap REITs (-8.39%) averaged the steepest declines.
- Only 9.55% of REIT securities had a positive total return in January.
- 16 out of 18 REIT property types averaged a negative total return in January. Malls (+3.14%) and Data Centers (+1.29%) were the only property types in the black.
- The average REIT NAV discount widened from -12.94% to -18.10% during January. The median NAV discount widened from -11.21% to -16.14%.
REIT Performance
The REIT sector’s strong performance in November and December to close out 2023 did not continue into January. Equity REITs averaged a -5.72% total return over the first month of 2024, badly underperforming the broader market as the NASDAQ (+1.0%), Dow Jones Industrial Average (+1.3%) and S&P 500 (+1.7%) all finished the month in the black. The market cap weighted Vanguard Real Estate ETF ( VNQ ) slightly outperformed the average REIT in January (-5.06% vs. -5.72%). The spread between the 2023 FFO multiples of large cap REITs (17.0x) and small cap REITs (12.7x) narrowed again in January, as multiples contracted 0.8 turns for large caps and 0.6 turns for small caps. Investors currently need to pay an average of 27.6% more for each dollar of FFO from large cap REITs relative to small cap REITs. In this monthly publication, I will provide REIT data on numerous metrics to help readers identify which property types and individual securities currently offer the best opportunities to achieve their investment goals.
Source: Graph by Simon Bowler of 2nd Market Capital, Data compiled from S&P Global Market Intelligence LLC. See important notes and disclosures at the end of this article
