2026 has been the year of the REIT.
After a lackluster 2025 when the FTSE Nareit All Equity REITs Index returned just 2.3%, while the Russell 1000 surged 17.4% and outperformed REITs by 15.1 percentage points, the script has completely flipped.
Through the first half of 2026, REITs delivered a 14.9% total return, besting the Russell 1000's 10.3% gain by 4.6 percentage points. The outperformance was even more dramatic early on. By the end of February, REITs were up 10.5% versus just 0.7% for the S&P 500, a 9.8 percentage point advantage.
What is driving the rebound? Strong operating fundamentals, says Nareit's Edward F. Pierzak. First quarter 2026 fundamentals tell the story.
1. Funds From Operations (FFO) rose 14.8% year over year.
2. Net Operating Income (NOI) grew 5.6%.
3. Same store NOI increased 3.8%.
4. About 65% of REITs posted FFO gains, and roughly 75% saw positive NOI growth.
The sector level turnaround is striking. Lodging and resorts went from negative 5.1% in 2025 to a 42.8% return in the first half of 2026. Data centers, the worst performer in 2025 at negative 14.2%, have surged over 33%. Healthcare led 2025 with 28.5% and has remained strong.
Underpinning it all are disciplined balance sheets, low leverage, and fixed rate long term debt, with average coupon rates on new issuances holding steady around 5.3%.
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