JPRE - The State Of REITs: March 2024 Edition
2024-03-22 10:24:52 ET
Summary
- REITs fell slightly deeper into the red in 2024 with a -0.81% total return in February.
- Mid cap (+1.46%) and large cap REITs (+1.04%) averaged gains in February outperforming small caps (-1.33%) and micro caps (-6.98%).
- Only 50.64% of REIT securities had a positive total return in February.
- 9 out of 18 REIT property types averaged a positive total return in February. Data Centers (+9.54%) were the top performer and Infrastructure (-11.52%) averaged the worst return.
- The average REIT NAV discount widened from -18.10% to -18.50% during February. The median NAV discount widened from -16.14% to-16.62%.
REIT Performance
The REIT sector has had a rough start to 2024 with back-to-back months of negative total return. Equity REITs averaged a -0.81% total return in February and again underperformed the broader market. The NASDAQ (+6.2%), S&P 500 (+5.3%) and Dow Jones Industrial Average (+2.5%) all saw strong gains in February. The market cap weighted Vanguard Real Estate ETF ( VNQ ) outpaced the average REIT in February (+1.98% vs. -0.81%) and has seen smaller losses year to date (-3.18% vs. -6.33%). The spread between the 2024 FFO multiples of large cap REITs (16.8x) and small cap REITs (12.4x) widened in February as multiples expanded 0.6 turns for large caps and contracted 0.3 turns for small caps. Investors currently need to pay an average of 35.5% 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
