Fourth quarter REIT performance, the outlook for REITs, and the global REIT industry took center stage during the Jan. 14 “FTSE Nareit U.S. Real Estate Indexes in Review and What’s Next” webinar.
Hosted by Nareit and Institutional Real Estate, Inc. (IREI), the quarterly webinar featured John Worth, executive vice president of research & investor outreach at Nareit, and Geoffrey. Dybas, , executive managing director, head of global real estate, and senior portfolio manager for Duff & Phelps. Mike Consul, senior editor of IREI’s Real Asset Adviser magazine, moderated the discussion.
The webinar started with Worth giving an overview of REIT performance during the fourth quarter of 2024 and for the year, followed by a lively conversation that was also shaped by questions from the audience. The webinar included key observations about:
- Total returns performance. REITs ended the year up 4.9% after falling 8.2% in the fourth quarter. Two key factors were responsible for that decline: uncertainty around interest rates and the strong negative correlation between the 10-year Treasury and the FTSE Nareit All Equity REIT Index, noted Worth. Since the end of the third quarter, the 10-year Treasury yield has moved materially higher and REIT total returns have retreated, he explained.
- Sector performance. Data centers and lodging/resorts led fourth quarter performance, with total returns of 7.5% and 1.6%, respectively, according to the FTSE Nareit All Equity Index. In terms of total returns for the year, Worth noted the best performing property sectors were specialty (35.9%), data centers (25.2%), health care (24.2%), and office (21.5%).
- After discussing the industrial sector’s total returns for 2024, which were down 17.7%, Dybas put that performance in context. He explained that the sector went through a period of rising supply that the market is now digesting. Looking forward to 2025, 2026, and 2027, he sees a “much more favorable supply/demand picture.”
- REIT outperformance of the S&P 500. Dybas discussed why he sees a “compelling” case for REITs to outperform the S&P 500 in the near future, as measured by the FTSE Nareit All Equity REIT Index. Dybas explained that the environment we’ve been in has many similarities to what happened during and after 1997–1999. During those years, REITs lagged the S&P 500’s performance, which was mainly fueled by tech. Yet from 2000 to 2006, REITs outperformed the S&P 500 for seven straight years, he noted. Dybas cited other similar examples from 2007 onward, citing that historical give-and- take between the two indices’ performances as one of the reasons why he is optimistic about REITs’ performance.
- Capital issuance. Dybas talked about how “skilled REITs are at derisking their debt maturities over time and taking advantage of what the unsecured bond market offers.” He also highlighted how U.S. REITs with global operations have “tremendous access to issuing debt overseas, often at much cheaper rates.” Focusing back on the U.S. market, Worth explained that the rate environment may cause REITs to pull back on issuance in the first quarter of 2025, but that there will likely be more issuance later in 2025. “REITs have well-structured balance sheets, so they can be selective and go in and out of the marketi at a time of their choosing,” Worth said.
- Global REIT industry. In response to a question about which sectors have a robust presence outside of the U.S., Dybas explained that large scale REITs in the data centers, telecommunications, and industrial sectors usually have the presence, but that there are some health care, self-storage, and retail REITs that have good exposure abroad. Worth built upon that answer, emphasizing that clients and investors want a network of data centers or cell towers—not just one center or tower—and REITs can offer that scale to help clients achieve their real estate strategy goals.
- 2025 Outlook. Worth gave an overview of Nareit’s 2025 REIT Outlook, which focuses on the three keys to unlocking the stagnant commercial real estate market, the four megatrends shaping the global real estate industry, the innovative ways institutional investors are using REITs, the reasons why REITs are poised for growth, and more.
The webinar closed with Dybas and Worth answering questions about whether the office sector’s current experience is similar to the retail sector’s experience in the early 2000s, the factors driving the telecommunications sector’s recent underperformance as measured by the FTSE Nareit All Equity REIT Index, how institutional investors are using REITs to complement private real estate in their portfolios, and the sectors that Dybas and Worth find promising.
The next webinar will be April 23 and will analyze first quarter performance of the FTSE Nareit U.S. Real Estate Indexes. Sign up to receive updates about that webinar, other events, and research.
Additional Resources
- Nareit’s 2025 REIT Outlook: Read more about Nareit’s outlook for 2025.
- Nareit Quarterly Research Letter: Get a quick summary of Nareit’s research and analyses.
- Nareit Market Commentaries: Read analyses of the macro- and micro-economic fundamentals affecting the REIT and CRE industries.
- REIT Market Data: Find daily, monthly, quarterly, and yearly reports on REITs.
- Research Library: Don't miss the latest REIT research.