The State Of REITs: October 2024 Edition

REIT Sector Performance - The REIT sector recorded a +3.09% average total return in September, marking the fifth consecutive month of positive performance, outperforming major indices like NASDAQ (+2.8%), S&P 500 (+2.1%), and Dow Jones (+2.0%) [2] - Year-to-date, the Vanguard Real Estate ETF (VNQ) has outperformed the average REIT with a return of +13.53% compared to +9.61% for the average REIT [2] - The spread between 2024 FFO multiples of large cap REITs (20.1x) and small cap REITs (14.2x) has widened, indicating that investors are paying 41.5% more for large cap REITs [2][17] Market Capitalization Performance - Mid cap REITs achieved the highest average total return in September at +5.01%, followed by large caps (+3.41%) and small caps (+2.59%), while micro cap REITs underperformed with a return of -0.42% [3] - For the year-to-date through September 2024, large cap REITs have outperformed small caps by 698 basis points [3] Property Type Performance - 14 out of 18 property types yielded positive total returns in September, with Shopping Centers leading at +10.62%, driven by a significant return from Wheeler REIT (+130.48%) [4][8] - Single Family Housing was the worst-performing property type in September, with a return of -2.80% [4][5] - Year-to-date performance shows Data Centers (+36.22%) and Advertising (+34.92%) as the top-performing property types, while Infrastructure (-10.85%) and Hotels (-6.77%) were the worst [6] FFO Multiples and Valuation - The average P/FFO for the REIT sector increased from 15x to 15.5x in September, with 72.2% of property types experiencing multiple expansion [6][7] - Data Centers, Land, Multifamily, Manufactured Housing, and Timber currently trade at the highest average multiples among REIT property types [7] - The average NAV premium for large cap REITs is +5.59%, while small cap REITs trade at a -15.25% discount [19] Dividend Yields - High dividend yields remain a significant attraction for investors in the REIT sector, with Creative Media & Community Trust offering the highest yield at 32.6% as of September 30, 2024 [10] - Monthly dividend payers are also highlighted, with Gladstone Commercial Corporation yielding 7.4% [15] Bankruptcy Trends - Bankruptcy filings in September showed a slight decline from August but remained elevated, with more bankruptcies in the first three quarters of 2024 compared to the same period in previous years [19][20]