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  • Writer's pictureRealFacts Editorial Team

Real Estate Investment Trusts (REITs) Outperform Broader Markets in May 2024

REIT graphics

The FTSE Nareit All Equity REITs Index posted a notable total return of 5.3% in May, marking its strongest monthly performance of 2024 and outpacing broader equity markets. This compares to a 4.7% increase for both the Russell 1000 and the Dow Jones U.S. Total Stock Market Index during the same period, as reported by Nareit.

While the All Equity REITs Index demonstrated strong growth in May, its performance through mid-June indicates more modest gains. From the start of the year through June 12, the All Equity REITs rose 0.5%, whereas the Russell 1000 and the Dow Jones U.S. Total Stock Market were up 2.6% and 2.5%, respectively. This highlights a divergence in performance, with broader markets maintaining a lead over REITs in 2024.

Table of Real Estate Property Sector Performance

Dividend yields remain a significant advantage for REIT investors. As of May 31, the dividend yield on the FTSE Nareit All Equity REITs Index stood at 4.19%, and the FTSE Nareit Mortgage REITs Index yielded an impressive 12.48%. This is substantially higher compared to the S&P 500's yield of 1.32%. Meanwhile, the yield on the 10-Year Treasury fell by 19 basis points, ending May at 4.49%, according to data from Nareit.

May's strong performance was driven by several sectors, with telecommunications leading the way with a total return of 11.0%. Health care and industrial sectors followed, with returns of 9.8% and 7.8%, respectively. At the sub-sector level, regional malls performed well with a return of 7.8%. However, some sectors lagged, such as timberland and office, which posted returns of 1.1% and 0.9%, respectively. The lodging/resorts sector was the only one to experience negative returns, at -2.8%.

Despite May's strong performance, the year-to-date total return for the All Equity REITs index stands at -4.3%, indicating it has yet to fully recover from earlier losses in the year. Since October 19, 2023, the All Equity REITs index is up 16.8%, reversing some of the earlier losses. In contrast, the Russell 1000 and the Dow Jones U.S. Total Stock Market are up 24.3% and 24.4%, respectively, since mid-October 2023. On a year-to-date basis, the Russell 1000 has increased by 10.6%, and the Dow Jones U.S. Total Stock Market has risen by 10.2%, noted John Barwick.

Table of Property Sector Performance

The FTSE Nareit Mortgage REITs Index saw a 3.1% increase in May, although it remains down 3.5% year-to-date. Within this category, home financing rose by 3.9% in May, while commercial financing increased by 1.9%. Year-to-date, home financing is up 2.1%, but commercial financing has declined by 11.0%, according to Nareit.

Inflationary pressures remain above the Federal Reserve’s target, leading most investors to anticipate that any potential interest rate cuts might occur towards the end of the year. This economic backdrop continues to influence market expectations and investment strategies.

The strong performance of the FTSE Nareit All Equity REITs Index in May 2024 underscores the resilience and attractiveness of REITs within the broader market context.

With high dividend yields and robust sector-specific returns, REITs offer a compelling investment option. However, the year-to-date performance highlights the need for a cautious approach, considering ongoing economic uncertainties and inflationary pressures.


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