The State Of REITs: November 2024 Edition

REIT Performance Overview - The REIT sector experienced a decline in October with an average total return of -3.42%, underperforming the broader market indices such as NASDAQ (-0.5%), S&P 500 (-0.9%), and Dow Jones Industrial Average (-1.3%) [1][2] - Year-to-date, the Vanguard Real Estate ETF (VNQ) has outperformed the average REIT, returning +9.72% compared to +6.48% for the average REIT [1] - The spread between the 2024 FFO multiples of large cap REITs (19.5x) and small cap REITs (13.7x) indicates that investors are paying 42.3% more for each dollar of FFO from large cap REITs [1][11] Market Capitalization Performance - Micro cap REITs led in October with a return of -2.04%, while large caps averaged -3.89% and small caps -4.62% [4][5] - Over the first ten months of 2024, large cap REITs outperformed small caps by 770 basis points [4] Property Type Performance - Only 22.2% of REIT property types had a positive total return in October, with a 14.60% spread between the best (Data Centers +5.52%) and worst performing property types (Self Storage -9.08%) [7][8] - Data Centers were the top performers in October, with Digital Realty Trust (DLR) leading at +10.13% [7] - Self Storage REITs saw the largest decline, with National Storage Affiliates Trust (NSA) experiencing a -12.55% drop [8] Year-to-Date Performance by Property Type - Data Centers (+43.62%) and Advertising (+31.78%) have been the best performing property types year-to-date, while Hotels (-9.80%) and Timber (-8.33%) were the worst [10] FFO Multiples and Valuation - The average P/FFO for the REIT sector decreased from 15.5x to 14.9x in October, with 83.3% of property types experiencing multiple contraction [11] - Data Centers currently trade at the highest average multiples among REIT property types at 33.8x [11] Individual Security Performance - Power REIT (PW) outperformed all other equity REITs in October with a return of +45.95% and a year-to-date return of +69.31% [13] - Service Properties Trust (SVC) was the worst performer in October, with a decline of -29.62% following plans to sell half of its hotel portfolio [14] Overall Sector Performance - Only 27.10% of REITs had a positive total return in October, contrasting with a negative average return of -10.46% for the first ten months of 2023 [15] - The REIT sector has shown improved performance in 2024 with an average total return of +6.48% [15] Dividend Yield Insights - High dividend yields are a significant attraction for investors in the REIT sector, with many REITs trading below their NAV [18] - Creative Media & Community Trust has the highest dividend yield at 35.8%, followed by Global Net Lease at 14.1% [19]