REITs Produce Stellar Returns in 2004

January 21, 2005 ( - 2004 was a tremendous year for those who invested in American real estate investment trusts (REITs), with the group as a whole returning 30.4% on average.

Based on the NAREIT Composite Index of all publicly traded REITs, five year returns have not been much worse, with the compound annual total return over this time frame reaching 22.5%.

In 2004, the retail sector was the REIT king of kings, posting a 40.2% return. This was closely followed by REITs that owned apartment communities, posting 34.7% in 2004. Industrial REITs were also close, posting 34.1% on the year. The sector with the worst performance was residential manufactured homes, which returned 6.4% in 2004, still above the average hedge fund return on the year.

The same trends with REITs were apparent on a global scale, with the EPRA/NAREIT Global Real Estate Total Return Index gaining 38% in 2004. European REITs were a gift from the skies, it seems, posting returns of 52.7% on the year. Over the past five years, Global REITs have seen annualized returns of 16.8%.