REITs historically perform well during and after recessions

The FTSE Nareit All Equity index, consisting of REITs that exclude mortgages, generated a 15.9% annualized return during recessions and 22.7% in the year following the end of a downturn, according to the National Association of Real Estate Investment Trusts. In contrast, private real estate funds, measured by the NCREIF Fund index–Open End Diversified Core Equity, had a 0.6% return during an economic downturn and 5.2% in the four quarters after that period ends.

In the year before recessions, private real estate funds had a 13.1% return vs. 5.7% for REITs.

Economists have been increasingly calling for a recession over the next year. A year ago, they put the odds at 15%, and that currently stands at 67.5%.

Last year was tough for REITs. The FTSE Nareit All Equity index lost 24.9%, with prices dropping by 27.5% and income adding about 250 basis points.

In December, the index lost 5% with the price return at -5.6%.

Last year's -24.9% return was the worst since 2008's -37.7%. The 2022 loss comes on the heels of a 41.3% gain in 2021.