REITs aren’t having the best start to September, after making quite a comeback last month.
Public real estate investment trusts were down more than 1.6 percent yesterday, the first trading day of the month, according to the FTSE Nareit All REITs index, which tracks nearly 200 U.S. public REITs of all stripes.
That’s a turn from the end of August, when the index’s total returns were up 3.3 percent for the month — the second-best performing month so far in 2025 and an improvement from the 1.1 percent drop recorded in July. However, August’s year-to-date figure is still under the 4.3 percent growth the index posted overall in 2024, according to data from Nareit, a REIT organization.
Despite the lackluster September performance, there are some indications of a possible rebound. The industry, for example, is anticipating that the Federal Reserve will cut interest rates soon, as the economy starts to enter a lower-growth phase of the cycle, said Evan Serton, senior vice president at Cohen & Steers.
“Lower rates, lower growth tends to be favorable for REIT performance,” Serton said.
Certain sectors within the REIT universe also have high demand with low supply — think senior housing and single-family rental homes.
“You’ve got a number of key property types where the demand is still healthy and the supply is really tight,” Serton said. “Right there, you’ve got pricing power. If you’re a landlord, you can continue to push rents in that kind of environment, even if the economy is slow.”
The REIT index’s August performance outperformed the broader stock market, as the S&P 500’s total returns climbed more than 2 percent in August. And, like REITs, the S&P 500 closed lower yesterday, as September tends to be a not-so-great month for trading generally.
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Among the major property types, telecommunications — cell towers — REITs and healthcare REITs are the top performers so far this year, posting year-to-date returns of nearly 9 percent and 21 percent, respectively. Free-standing retail properties are also up by almost 9.8 percent year to date.
Meanwhile, office REITs, working to regain their footing post-pandemic, continue to struggle as those stocks are down about 3.6 percent.
Data center REITs are performing the worst so far this year, down nearly 12.8 percent, as investors wonder whether future AI technology will need as much infrastructure as once thought.
But Serton thinks AI’s improvements will bode well for data centers in the long run.
“What these efficiency gains are likely to open up is an even greater world of services fueled by AI,” he said. “We still are enjoying a very tight supply environment for data center assets, and so the landlords that operate in this market, we believe, also have pricing power — even now.”