REITs enjoyed record-high occupancy rates throughout all three quarters of 2018, according to the National Association of Real Estate Investment Trusts, or Nareit.
The vehicles delivered strong earnings growth in the third quarter of 2018 on a year-over-year basis, just as they did during the first two quarters of the year.
According to Nareit’s Total REIT Industry Tracker Series, which measures quarterly composite performance of the entire U.S.-listed REIT industry, third-quarter funds from operations (FFO) rose 11.1 percent over the third quarter of 2017.
“REITs showed solid growth in operating performance over the last three months on a year-over-year basis, continuing the trend we have seen throughout 2018,” said Steven A. Wechsler, Nareit’s president and CEO. “The REIT industry remains well positioned to provide investors with strong dividends and growth.”
Significant increases for the office, industrial, manufactured home and single-family home REIT sectors powered reported gains. However, those gains were down 0.7 percent from the second quarter’s exceptionally strong performance.
The occupancy rate for REIT-owned properties reached a record high of 94.3 percent in the third quarter, with occupancy rates for office and industrial measuring the strongest growth. Office gained 170 basis points, while industrial gained 58 basis points.
Each basis point is a measure of the fees, spreads and rates in commercial real estate finance.
The REIT industry’s strong operating performance translated into dividend growth for investors. Dividends paid in the third quarter totaled $14.3 billion, up 9.8 percent over the third quarter of last year and up 0.3 percent over this year’s second quarter.
REITs’ net operating income (NOI) rose 4.8 percent from last year’s third quarter, but fell 2.1 percent against 2018’s stronger second quarter.
Same-store net operating income, which focuses on properties held for one year or more to factor out the effects of property acquisitions and dispositions, rose 2.8 percent, based on strong gains in manufactured homes, industrial, office and single-family homes sectors.