Will Rising Rates Hurt REIT Performance?

The prevailing wisdom on real estate investment trusts (REITs) is that they’ll be doomed once interest rates start to rise. Because of the way REITs are structured for tax purposes they have to pay out at least 90% of their taxable income in the form of dividends.
The thinking goes that higher interest rates will provide competition against the yields on REITs, making them less attractive. I’m never one to take rules of thumb at face value so let’s see how this theory worked in past rising rate environments.
The Wilshire REIT Index goes all the way back to 1979. Here’s how this index performed during prior rising interest rates environments:

In four out of the six periods where rates went substantially higher, REITs were actually positive. And in three out of the four positive time frames they showed outstanding performance. (more)
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