Essex Property Trust, an apartment REIT, will join the S&P 500. The change is effective April 1. Essex is currently a member of the S&P midcap 400. As of Wednesday, shares of the REIT were up 15.8% year to date.
Office REITs outperformed the FTSE NAREIT Equity REIT Index in the first half of the year. Through the end of June, office REITs posted total returns of 6.71% for the year, which is higher than the 6.49% increase for the equity REITs index but lower than the 12.50% return of the S&P 500.
The arrival of many new mortgage REITs is a fast-developing trend in commercial real estate. There have been several successful IPOs providing a substantial amount of capital to this sector this year, and more are in the pipeline.
Australian REITs may be bargain-priced, according to Todd Canter, chief executive for LaSalle Investment Management Securities Asia-Pacific. REITs in Australia have been hit hard, but the country's economic fundamentals remain strong. "The market is concluding that there's [a cap-rate] expansion, which is far greater than what we believe or see in the marketplace," Canter said.
The valuation gap between REITs and the S&P 500 has closed, prompting a regular contributor to Seeking Alpha to reduce his short REIT investments. REITs that make up 96% of the Russell 3000 currently have an FFO of 9.0x -- the same FFO as the S&P 500.