This paper assesses the response of real estate investment trusts (REIT's) to unexpected changes in US monetary policy. A critical element in this study is the use of futures markets to isolate unexpected changes in the policy rate. We find a significant negative response of REIT returns to a surprise change in the policy rate. The paper then examines the potential sources behind such an observed response. We find important differences between the REIT market and the broader equity market. Adopting a variance decomposition approach we find that monetary policy surprises consistently have an impact on REIT returns and that the dividend channel is a driving force behind this influence. The results indicate the particular sensitivity of the general real estate market to Central Bank behaviour. Copyright © 2010 John Wiley & Sons, Ltd.