How REITs Perform During Recessions

REITs have not followed one pattern in U.S. recessions. With dividends reinvested, the FTSE Nareit All Equity REITs index rose 9.2% during the 1990-91 recession and 10.8% during the 2001 recession, then fell 45.3% during the 2007-09 recession and 11.5% during the two-month 2020 recession. In the 2007-09 financial crisis, the index dropped 68.3% from January 2007 to February 2009, its dividends fell 39.5% in 2009, and it did not regain its peak until July 2012. REITs with less debt and later debt maturities fell less.

How did REITs do in each recession?

The table uses the recession dates set by the National Bureau of Economic Research (NBER) and our calculations from Nareit's monthly index values, with dividends reinvested. Month-end figures miss lows reached in the middle of a month.

What stood out in each one:

• 1990-91. The REIT slide began in August 1989, about a year before the recession, and bottomed in October 1990. The index then returned 35.7% in 1991. Listed REITs were worth $8.7 billion at the end of 1990, against $1.44 trillion at the end of 2025, so this episode says less about today's market.
• 2001. REITs returned 13.9% for the year while the S&P 500 lost 11.9%. The index did fall 13.4% from June to October 2002, after the recession had ended.
• 2007-09. REITs lost 37.7% in 2008, close to the S&P 500's 37.0% loss. On price alone, without dividends, the index did not return to its January 2007 level until January 2015. As prices fell, the dividend yield rose from 3.40% in January 2007 to 10.08% in February 2009.
• 2020. REITs lost 5.1% for the year while the S&P 500 gained 18.4%. The month-end low came in March 2020, and the index regained its January 2020 high in March 2021.

Why did REITs fall so much more in 2007-09?

The 2007-09 recession came with a financial crisis, and REITs entered it with more debt that came due sooner. Nareit reports that REIT debt equaled 58.3% of book assets (assets at their balance-sheet value) in 2008, that earnings covered interest expense only 1.9 times in the fourth quarter of 2008, and that the average REIT's debt had less than five years left to maturity going into the crisis.

A 2013 study of listed REITs, posted by Nareit, compared price changes from January 2007 to February 2009 with each REIT's balance sheet at the end of 2006. After accounting for property type, prices fell more at REITs with higher debt relative to assets and at those with more variable-rate debt or more debt due within two or three years. The REITs with debt coming due also issued more stock and sold more property in 2009, when prices were depressed, and mall owner General Growth Properties filed for Chapter 11 bankruptcy that year.

REITs went into 2020 with stronger balance sheets. In the second quarter of 2020, Nareit put debt at 50.8% of book assets, interest coverage at 3.4 times, and the average time to maturity at 83.4 months, nearly seven years. The index took 14 months to regain its January 2020 high, against 66 months after its January 2007 peak. For the second quarter of 2026, Nareit reports equity REIT debt at 34.4% of total market capitalization (debt plus the market value of shares, a different basis from book assets) and a coverage ratio of 4.5 times.

Which property sectors held up?

Total returns by sector, with dividends, from Nareit:

Self storage was the only sector in the table with gains in both years. Industrial REITs fell the most in 2008 but gained in 2020, while lodging REITs and regional malls were near the bottom both times. Types of REITs explained compares what each sector owns and how long its leases run.

What happened to REIT dividends?

By our calculation from Nareit's monthly data (each month's income return times the prior month's price index, added up for the year), dividends paid on the All Equity REITs index fell 39.5% from 2008 to 2009 and did not get back to the 2008 level until 2015. In 2001, by contrast, dividends on the index were down 0.4% from 2000.

In 2020, the cuts were smaller and concentrated by sector. Total dividends paid by listed REITs fell 16.8% in the second quarter of 2020 from the first, to $13.1 billion, with retail REITs paying 40.5% less and lodging and resort REITs 39.8% less. For the full year, dividends on the index were 16.5% below 2019, and they passed the 2019 level in 2023.

In both downturns, the IRS let REITs keep cash by paying most of a dividend in new shares. Revenue Procedure 2008-68 let publicly traded REITs pay as little as 10% of a declared dividend in cash, with the rest in stock, for tax years ending by December 31, 2009. Revenue Procedure 2020-19 lowered the minimum cash share from 20% to 10% for dividends that publicly offered REITs declared from April 1 through December 31, 2020. Under both, shareholders who received stock were taxed as if they had received the cash they could have taken. REIT dividend yields explained shows how to compare a REIT's yield with its sector's.

How can you check a REIT before the next recession?

These figures appear in a REIT's annual report (Form 10-K) and quarterly earnings release:

1. Debt due in the next two to three years. Compare it with cash and the unused part of the REIT's credit line.
2. Variable-rate debt that is not hedged. Floating-rate debt costs more as soon as rates rise unless the REIT has fixed the rate, for example with an interest rate swap, a contract that trades floating-rate payments for fixed ones.
3. Interest coverage. This is how many times earnings cover interest expense. Compare the REIT's figure with the 1.9 times REITs had in late 2008 and the 4.5 times for equity REITs in the second quarter of 2026.
4. Dividend payout ratio. Divide the dividend by AFFO, adjusted funds from operations, which adds real estate depreciation back to net income and subtracts routine property spending. A REIT paying close to all of its AFFO has little room before a cut; FFO and AFFO explained shows the math.

REIT risks every investor should understand covers interest rates, sector decline, and dividend cuts outside of recessions, and real estate market cycles covers how property markets move through expansions and downturns. For how REITs are structured and taxed, see what REITs are and how they work.