REIT Long-Term Returns and Wealth Creation

Abstract

This study examined the performance of 371 equity real estate investment trusts (REITs) over the period 1972–2020. Unlike stocks, we found that the majority of the 371 REITs outperformed one-month T-bills, particularly over longer holding periods and in the modern REIT era. While most REITs outperformed the T-bills, only a minority of them outperformed the overall equity REIT market. REITs that outperformed the overall equity REIT market concentrated in the health care, industrial, residential, and other specialty REIT sectors. In terms of wealth creation, REITs in aggregate created a total net wealth of $0.89 trillion to their shareholders, but the wealth creation was highly concentrated in relatively few top-performing REITs. Specifically, the top five (20) REITs together accounted for almost 30% (60%) of the total net wealth creation. Overall, our results suggest that relative to the T-bills, REITs performed better than stocks.