Returns for US equity real estate investment trust stocks underperformed the broader market in the first quarter.
The Dow Jones Equity All REIT Index closed the quarter with a total return of 1.8%, 5.7 percentage points lower than the S&P 500's strong 7.5% return, according to S&P Global Market Intelligence data.
On a 1-year basis, the Dow Jones Equity All REIT Index was down significantly with a return of negative 19.3%. The S&P 500 was also in the red with a return of negative 7.7%.
Sector returns
Self-storage and industrial REITs closed the first quarter with the highest total returns.
The Dow Jones US Real Estate Self Storage Index finished the quarter with a 12.4% return, the highest of any Dow Jones US Real Estate sector index.
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Within the self-storage sector, Life Storage Inc. performed the best during the quarter with a return of 34.6%, the third-highest return of any REIT stock above $200 million market cap. Life Storage's share price jumped 11.6% on Feb. 6 after Public Storage made an unsolicited all-stock offer to acquire the REIT. While Life Storage declined Public Storage's proposal, claiming it significantly undervalued the REIT, the self-storage REIT later agreed to a merger with Extra Space Storage Inc. after quarter-end on April 3.
Among other self-storage REITs, National Storage Affiliates Trust logged a quarterly return of 17.2% and CubeSmart logged 16.0%. Public Storage, the largest self-storage REIT by market capitalization, closed the quarter with a 9.0% return.
The Dow Jones US Real Estate Industrial Index followed next with an 8.9% return for the first quarter. Within the industrial sector, Terreno Realty Corp. logged a 14.3% return for the quarter, EastGroup Properties Inc. closed the quarter with a return of 12.5%, and Prologis Inc. had a return of 11.5%.
On the other hand, office REIT stocks tanked during the first quarter, with the Dow Jones US Real Estate Office Index posting a return of negative 14.7% for the quarter.
More than half of the 25 worst-performing REIT stocks came from the office sector. Hudson Pacific Properties Inc. finished the quarter with a negative 28.9% return, while SL Green Realty Corp.
Top-performing REITs
Diversified Healthcare Trust was the top-performing REIT stock above $200 million market capitalization for the first quarter, with a total return of 111.5%. The healthcare REIT's share price soared following its 2022 fourth-quarter earnings release, when it reported significant improvement in its senior housing portfolio, driving year-over-year same-store net operating income growth of 34.8% for the quarter, the highest of any U.S. REIT.
Hotel-focused Service Properties Trust placed second with a total return of 40.0% for the quarter.
Bottom-performing REITs
At the other end of the spectrum, communications REIT Uniti Group Inc. recorded the worst quarterly performance of any REIT stock, with a return of negative 33.0%.
Gladstone Commercial Corp. followed next with a return of negative 30.3%. The diversified REIT's share price dropped 13.8% on Jan. 11 after the company slashed its monthly dividend payment 20% to maintain capital in anticipation of further economic headwinds.
