Can REIT ETFs Keep On Outperforming?

January 12th at 11:00am by Tom Lydon

Last year, real estate investment trust exchange traded funds (ETFs) left the broader markets in the dust. Is it too much to hope for more of the same in 2011?

Last year was a lucrative one for these investments, finishing 2010 with a gain of nearly 28%. Those returns matched what they did in 2009 and they were nearly double the performance of the S&P 500, reports Jeff Benjamin for Investment News. [REIT ETFs Are Picking Up Steam.]

Broken down by REIT subsector:

  • Apartments and lodging/resorts had the strongest performance among REIT sectors, gaining 47% and 42.8%, respectively. iShares FTSE NAREIT Residential (NYSEArca: REZ) allocates 45.8% to apartments.
  • Industrial REITs gained 18.9%, while office REITs gained 18.4%. You can get exposure to them with the iShares FTSE NAREIT Industrial/Office (NYSEArca: FIO); offices make up 62.6% of the ETF.

Thanks to that kind of performance, REITs are hotter than ever. Last year, REITs raked in cash thanks to $23.6 billion in additional stock offerings. That’s the most since tracking started in 1992, says Pensions & Investments.

A trend has clearly been here, and appears to remain. As with other sectors, there are a growing number of ways to get REIT exposure via ETFs. In addition to this week’s launch of the Schwab U.S. REIT ETF (NYSEArca: SCHH), two big broad plays are SPDR Dow Jones REIT (NYSEArca: RWR) and First Trust S&P REIT (NYSEArca: FRI).

Tisha Guerrero contributed to this article.

The opinions and forecasts expressed herein are solely those of Tom Lydon, and may not actually come to pass. Information on this site should not be used or construed as an offer to sell, a solicitation of an offer to buy, or a recommendation for any product.