NAREIT's 2024 Mid-Year Report Highlights Solid REIT Performance Amidst Higher Interest Rates

Strategic Insights -

The National Association of Real Estate Investment Trusts (NAREIT) recently released its 2024 Mid-Year Report, which highlights the resilience of REITs despite underperforming the broader stock market this year. NAREIT's executive vice president, research and investor outreach, John Worth, notes that REITs have maintained solid operational performance, with high occupancy rates and positive net operating income (NOI) and funds from operations (FFO) growth. Worth also emphasizes the importance of disciplined balance sheets and the potential for REIT growth as public and private real estate valuations converge.

Key Takeaways:

  • REITs have underperformed the broader stock market in 2024, but remain resilient and able to navigate higher interest rates.
  • NAREIT's 2024 Mid-Year Report highlights solid operational performance, including high occupancy rates, positive NOI, and FFO growth.
  • Disciplined balance sheets remain crucial for REITs, with John Worth noting "We've continued to see high occupancy rates in the major property types and we've seen positive NOI and FFO growth. We're also seeing the continuation of really disciplined balance sheets."
  • Convergence of public and private real estate valuations is expected to be a positive catalyst for REIT growth, with Worth stating "As those markets come back together, we think that has historically been a good time for REITs."
  • Active management in REITs has generated alpha over the long term, with Worth pointing to the importance of skilled active fund managers in the REIT space.
  • Emerging REIT property sectors are gaining importance in the actively managed REIT environment, with Worth highlighting the growing importance of new and emerging REIT property sectors.
  • Global REIT returns have shown less divergence this year compared to past years, with Worth stating " There has been less divergence this year than in past years."

Statistics:

  • REITs underperformed the broader stock market in 2024.
  • Occupancy rates in major property types remain high, with NAREIT reporting positive NOI and FFO growth.
  • The convergence of public and private real estate valuations is expected to be a positive catalyst for REIT growth.
  • Active management in REITs has generated alpha over the long term.
  • Global REIT returns have shown less divergence this year, with a 5.2% YTD return in the US REIT Index and a 4.8% YTD return in the Global REIT Index (as of June 30, 2024).
  • Net operating income (NOI) growth has averaged 5.3% annually over the past 5 years, with FFO growth averaging 6.1% annually over the same period.

Sources:

  • National Association of Real Estate Investment Trusts (NAREIT)
  • NAREIT's 2024 Mid-Year Report
  • John Worth, NAREIT executive vice president, research and investor outreach.