REIT returns rose in March as investors turned their attention to more defensive sectors of the economy, analysts said.
The total returns of the FTSE Nareit All REITs Index rose 3.7 percent in March, while the S&P 500 dropped 2.5 percent. The total returns of the FTSE Nareit Mortgage REIT Index gained 6.5 percent in March.
The yield on the 10-year Treasury note fell 0.1 percent in March.
BMO Capital Markets analyst John Kim said REITs found favor late in the month as investors viewed the sector as less volatile than other parts of the broader market, particularly the technology sector. Investor perception that the yield on the 10-year Treasury note has now stabilized also supported REIT performance, he added.
Matt Kopsky, analyst at Edward Jones, described the broader market as “skittish” in March, in part due to concerns about inflation and an escalating trade war. “Due to increased macro uncertainty, more defensive sectors such as REITs outperformed,” he said.
Compass Point Research & Trading LLC analyst Steve Manaker pointed out that relative to the broader market—and even on an absolute basis—“REIT valuations looked attractive” last month. Interest rate concerns ebbed and investors felt it was a safer time to come back into REITs, he explained.
“The plateauing of the 10-year Treasury makes us incrementally more positive for now,” Manaker said.
Gains were seen across most segments of the REIT market.
Returns for apartment REITs rose 7.4 percent in March. Kopsky noted that a few apartment REITs reported favorable trends for the first two months of the year, which helped the group overall. Continued construction delays to start the year may smooth out new deliveries in 2018, he added.
Health care REITs posted returns of 5.9 percent, as the segment benefited from interest rate stabilization, according to analysts.
Regional mall REIT returns fell 0.9 percent in March, as the market continued to digest the impact of Brookfield Property Partners LP’s proposed acquisition of GGP Inc. (NYSE: GGP) on valuations.