Many analysts warned at the beginning of last year that gains in real estate investment trusts (REITs) were going to slow in 2014. Fortunately for investors who love these investment vehicles, REITs came through yet again, yielding returns that totaled 27.15 in 2014 according to the Financial Times Stock Exchange REIT Index. During the 11-month period between December 2013 and November 2014, the REIT market cap expanded by $220 billion, a result of “an active effort by REITs to improve their returns,” according to Trepp analysts.
In addition to active work on returns within the U.S., several other countries adopted an REIT format thanks to international exposure to U.S. REITs and also the perception that real estate fundamentals are improving around the world. The result of this international expansion was improved activity in REIT markets in the U.S. as well, in large part because new investors were exposed to the idea of REITs but opted to invest in an established market.
REITs are typically attractive to investors who are comfortable with the idea of stock trading – or at least stock investing – but who also find real estate to be a “safe haven” of sorts from more traditional stock investing. REITs are far more liquid than actual real estate and offer investors the opportunity to invest in types of properties that might otherwise be financially out of reach, such as shopping malls, healthcare complexes, or other large, commercial developments.
by Carole Ellis