Did someone say something about the deflating of a real estate bubble? Sure, home prices may be falling, but real estate investment trusts (REITs) outperformed broad market averages in the first quarter of this year. Standard & Poor's REIT equity analysts believe this outperformance can continue.

The REITs' performance in the first quarter is particularly impressive, considering their returns this decade. In the past 10 years (ended March), the S&P REIT composite index posted a total return of 4%, vs. the S&P 500's 3.5%. Then, in 2007, as news about a real estate bubble and subprime mortgage problems filled the headlines, REITs fell about 16%.

But in the first quarter of 2008, the group posted a 0.8% total return, at a time when the S&P 500 index fell 9.4%.

We screened our database for REITs with 4- (buy) or 5-STARS (strong buy) rankings from S&P Equity Research. Seventeen REITs made the cut:

  REITs Favored by S&P

Company

Symbol

Alexandria

ARE

AMB Property

AMB

Annaly Capital Management

NLY

Developers Diversified Realty

DDR

Essex Property

ESS

Federal Realty

FRT

First Industrial Realty

FR

General Growth Properties

GGP

Macerich

MAC

Mack-Cali

CLI

National Retail Properties

NNN

ProLogis

PLD

PS Business Parks

PSB

Regency Centers

REG

Simon Property Group

SPG

Taubman Centers

TCO

Weingarten Realty

WRI

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