Philippine REITs haven’t been around that long and the very first REIT only listed in 2020. So it would not be fair to compare our REITs with the Philippine Stock Exchange Index (PSEi).

We can however look to countries like the United States where REITs have existed for much longer and I was really surprised at the data. In the time period between 1972 to 2019, the total annual return comparison is:

S&P 500 Index = 12.1%

FTSE NAREIT all equity REIT Index = 13.3%

In Japan, from 2003 to 2015, the total annual return comparison is:

TOPIX = 8.6%

TSE Reit Index = 10.9%

Now I’m not saying that the Philippines will mirror the above results and that REITs will outperform stocks. We need to remember that past performance is not a reliable indicator of future returns. I was just genuinely surprised that in the above examples and time periods, REITs not only offered similar annual returns, it actually exceeded that of the stock market. I would have expected the opposite because stocks, being riskier, should perform better over time. Similarly, the reason you get less than 1% p.a. from a bank deposit is because its practically risk free.

Most Philippine REITs have a goal of achieving 10% p.a. total return: 5% dividend and 5% appreciation. Looking at TSE Reit Index’s 10.9% and FTSE NAREIT Index’s 13.3%, that target looks achievable.

The reason I like investing in REITs is for the predictable and growing stream of quarterly dividends but I would not be complaining at all if it offers price appreciation as well.