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Real estate investment trusts in the first half of the year outperformed the broader market as interest rates remain elevated, largely thanks to strong operating fundamentals.
In the first and second quarters, the Nareit All Equity REIT index posted total returns of nearly 15 percent, according to data from Nareit, a REIT industry group. Meanwhile, the Russell 1000’s returns were 10.3 percent and the S&P 500’s was 10.2 percent.
The REIT index’s returns performance was also an improvement from the same time last year, when tariff uncertainty weighed heavily on the sector. For all of 2025, the equity REIT index saw total returns of just 2.3 percent, compared to the Russell 1000, which eclipsed equity REITs by about 15 percentage points.
Underpinning the improved performance is strong operating fundamentals, said Edward Pierzak, senior vice president of research at Nareit. Public REITs have strong balance sheets with improved metrics. For instance, about 65 percent of REITs had positive year-over-year growth in their funds from operations, about 75 percent saw positive net operating income growth and around 65 percent had growth in their same-store net operating income.
“All those numbers have been solid, they’ve been keeping pace with inflation as well,” Pierzak said.
Lodging and resort REITs have fared the best year to date, with total returns of almost 43 percent. This growth has stemmed from strong business and leisure travel demand, Pierzak said.
This was a reversal from 2025, when lodging REITs posted total returns of -5.1 percent.
A similar situation played out with data centers, which have since become an investor favorite. Total returns for data centers for the first half of the year clocked in at just over 33 percent, though last year, they were the worst performing sector.
In 2025, there were discussions about the impact of Chinese AI model DeepSeek on data centers and if they would really be needed. But eventually, portfolio managers viewed the sector as an opportunity for investment, Pierzak said.
However, the first half of 2026 did see two REIT sectors in the red. Telecommunications REITs, or companies that focus on cell towers, were down 7.5 percent, and gaming REITs were down almost 1 percent.