REIT Property-Type Sector Integration

Equity real estate investment trust (REITs) grouped by property-type sectors have become more integrated over the 1989 to 1998 period as evidenced by increasing correlation over time. Specifically, six pairs of equity REITs grouped as having predominantly apartment, industrial, office and retail properties in their portfolios were examined for correlations of rolling sixty-month returns. Property-type-specific equity REIT portfolios showed a similar trend in rolling sixty-month return correlations, but at generally lower levels than randomly-generated property-type-neutral portfolios. When correlations of property-type-specific portfolios differed statistically from property-type-neutral sample portfolios, the average monthly return differences were not found to be statistically significant.