Since 2000, REITs as a whole have experienced a gradual decline in same-store net operating income (NOI). However, the industry has recently started to rise back into positive territory. Although the retail sector is the only sector to maintain positive same-store NOI percent change during the period, the hotel, multifamily and office sectors were largely responsible for the overall REIT industry decline during a three-year period from 2001 to 2003.

The lingering impact of the terrorist attacks on America contributed to the hotel sector's lackluster performance during that life span. (Note: Due to the nature of the sector's operations, SNL Financial evaluates the hotel sector by revenue per available room (RevPAR) percentages in comparison to the NOI used in other equity REIT sectors.) In 2001 alone, the hotel sector's RevPAR dropped 7.5 percent. That was followed by smaller declines in 2002 and 2003. However, through the third quarter 2004, hotels had made a remarkable comeback posting a 6 percent RevPAR gain for the year.

Same-Store NOI Percent Change

Source: SNL Financial. Note: RevPAR percentage is used to evaluate the hotel sector only.

Due primarily to the low mortgage rate environment and the consequent increase in home ownership, the multifamily REIT sector was the worst performing sector in 2003 in terms of NOI percent change and was one of only two sectors still in the negative through third quarter 2004.