REITs Outperform S&P 500 in First Quarter 2026

The FTSE Nareit All Equity REITs Index returned 8.4% in the first quarter of 2026, outperforming the S&P 500's 3.1% total return for the first time since 2023. The rebound reflects investor expectations of eventual Federal Reserve rate cuts, stabilizing fundamentals across most commercial real estate sectors, and a rotation out of growth-heavy large-cap technology stocks into dividend-paying REITs.

Within the index, data center REITs led with a 14.2% quarterly return, driven by sustained demand from artificial intelligence infrastructure buildouts. Industrial REITs returned 11.7%, supported by continued e-commerce logistics leasing. Retail REITs returned 9.1%, their strongest quarter since 2021, on improving occupancy and rent growth in open-air center portfolios.

"The narrative on commercial real estate has shifted meaningfully over the past six months," said Calvin Schnure, senior economist at Nareit. Schnure cited improving visibility on the Fed's rate path, resilient consumer spending, and the completion of most large public REITs' balance-sheet repair as key factors.

Residential REITs posted mixed results within a 6.2% sector return. Single-family rental operators Invitation Homes and AMH returned 8.1% and 7.4% respectively. Apartment REITs in Sun Belt-concentrated portfolios such as Camden Property Trust and MAA underperformed at 3.9% and 2.8%, reflecting the broader Sun Belt supply-driven rent pressures.

Office REITs remained the most troubled segment but posted a positive 4.3% quarter. Boston Properties returned 5.8%, helped by strong demand in trophy Boston and New York assets. SL Green Realty, focused on Manhattan, returned 9.2%. Sunbelt office owners Highwoods Properties and Cousins Properties returned 3.1% and 2.2%.

Private commercial real estate capital has flowed back to public REIT markets. Green Street Advisors data showed the premium to net asset value for public REITs narrowed to an average of 2% in March, from a 14% discount a year earlier. That shift has supported new share issuance, with $8.2 billion in follow-on equity raised during the quarter, per S&P Global Market Intelligence.

Institutional investor sentiment has warmed but remains cautious. A CBRE survey of 236 institutional investors found that 62% plan to increase commercial real estate allocations in 2026, up from 48% in the 2025 survey. Office, however, remained the least-favored sector across every investor type polled.

Looking ahead, Nareit projects REIT industry FFO (funds from operations) growth of 5.1% in 2026, following 2.8% growth in 2025. The organization sees most sectors reaching same-store NOI inflection during the second half. Sector relative preferences remain data centers, industrial, and necessity-based retail.