More than four decades ago on Capitol Hill and at the White House, real estate investment trusts were created and the real estate investment landscape changed forever. Congress set out to provide all investors the ability to invest in large-scale commercial properties. The rest is history. REITs are living up to the fullest hopes and expectations of their charter, and more, by producing solid returns, generating high income and offering a much-needed level of portfolio diversification.

In the pages of Real Estate Portfolio magazine, we publish articles, interviews and columns detailing the growing importance and benefits of including REITs in a diversified portfolio. However, the amount of third-party information published about REIT investing in recent years has been staggering. As a result, we have compiled a wide array of this research into one comprehensive source presenting the facts, debunking the myths and charting the future course of REIT investing. Leading industry executives, authorities and researchers provide their views on the state of the REIT industry and where it is headed.

In compiling the data and analysis for this issue, the same two messages kept reappearing over and over again in various forms: REITs provide a reliable source of high dividends with a history of solid long-term returns; and because REIT stocks have a relatively low correlation with other market sectors including them in a portfolio significantly improves its diversification. Take, for example, the landmark research by asset allocation experts Ibbotson Associates, which showed that including a 10 percent or 20 percent allocation to REITs increased a portfolio’s total return while also lowering risk.

If the industry’s stellar performance wasn’t enough to get investors’ attention, the various research studies detailing the benefits of REIT investing and the pickup in coverage in the financial media certainly helped. REITs even earned a mention on one of the hottest shows on television ("The Sopranos"). All this has led to a marked increase in investor knowledge of and investment in publicly traded REITs. Fund flows into REITs have come from both institutional and individual investors, with a recent surge being seen in the defined benefit and defined contribution markets. These are two areas with ample room left for improvement (but one in which NAREIT staff and industry executives are actively working to remedy).

Another area that has seen significant growth has been global real estate investing. U.S. REITs have expanded their international holdings while at the same time tax law changes have helped attract foreign investors. Additionally, roughly 20 jurisdictions across the globe now have a REIT-like investment vehicle.

Clearly, REITs have come a long way as both an industry and an investment since 1960. But as the analyst comments in "Clear Skies Ahead" show, the best may be yet to come.

Matthew Bechard
Editor in Chief