As share prices fell nearly 20 percent in 2007 from their previously lofty levels, public REITs that own commercial properties saw total returns drop an average of 15.7 percent for the year. Likewise, values of securities backed by commercial mortgages fell fast as the credit crunch took hold during the second half of the year, with the devaluation only accelerating as bond yields further skyrocketed during 2008’s first quarter.

Accordingly, tax-exempt investors heavily exposed to REIT stocks and commercial mortgage–backed securities weren’t exactly celebrating the New Year or the months that followed. But institutional investment managers have since seen at least some cause for cheer about prospects for securitized commercial real estate equity and debt — thanks in part to ongoing increases in allocations to the real estate asset class.

After average share prices fell another 5 percent in January and February, share prices rebounded more than 11 percent during