This article is republished with permission from REITCafe.

Real estate investment trusts (REITs) surprised many last month and performed better than expected in the aftermath of the U.S. election and new leadership in office. According to the National Association of Real Estate Investment Trusts (NAREIT), the FTSE/NAREIT All REIT Index posted a return of 0.2 percent last month. The All Equity REIT Index came in at 0.2 percent as well, compared to the Standard & Poor’s 500 index return of 1.9 percent. The ten-year Treasury yield saw little movement in January, hovering around 2.44 percent.

Thus far, 2017 has been calm compared to last year’s volatility. Particularly toward the end of 2016, REITs were trading in record tight correlation to government bond yields. However, that correlation has subsided significantly in January. The REIT index has unexpectedly rallied since its dip immediately following the election, proving a longtime REIT assumption to be a myth: REITs fall when interest rates rise. According to Forbes, one reason that REITs headed up despite the rate hike is that many REITs have actually cut debt in recent years, giving them some protection from higher interest rates. Secondly, many expect the Trump administration’s tax and infrastructure plans to expand U.S. gross domestic product (GDP). Tax cuts and increased spending on infrastructure generally fuel economic growth, which ultimately boosts the fundamentals of the real estate industry.

As for REIT property sectors, timber REITs outperformed in January, while industrial REITs fell. Timber REITs posted a total return of 3.7 percent, while industrial REITs dropped by 6.5 percent. Despite the industrial subsector’s decline, Brad Case, senior vice president of research at NAREIT, comments that industrial REITs have “still outperformed the broad stock market over one-year and three-year time periods.”

Overall, January performance comes as a sigh of relief to many, as the REIT sector is trading right around its post-recession averages and has moved away from extreme levels of REIT/rate correlations. The sector’s modest but positive returns indicate that REIT performance is not in lockstep with Treasury yields and interest rates, and that the true economic fundamentals for REITs appear solid.

* TREPP-i Survey Loan Spreads levels are based on a survey of balance sheet lenders. For more information, visit Trepp.com.