John Worth

Converging Forces: REITs, Institutional Investors, and Global Real Estate in 2026

Kyle Gustafson — Fri, 05 Dec 2025 20:04:18 +0000

Converging Forces: REITs, Institutional Investors, and Global Real Estate in 2026 Kyle Gustafson Dec. 5 2025

Each year, Nareit conducts about 500 engagements with significant investors from across the globe, spanning the disciplines of asset ownership, management, and consulting. The purpose of these meetings is to help inform these leading investors about the many benefits of REITs. These meetings also provide Nareit with a very useful window into institutional investors’ sentiment: what they value about REITs, where misconceptions persist, and how their approaches toward using REITs are evolving. Against that backdrop, Nareit’s 2026 outlook addresses the topics that have been on the minds of real estate investors, including valuation divergences, compelling opportunities, and global strategies. It also discusses the convergences that may drive global REIT outperformance in 2026.

Dual Divergences

REITs delivered strong operational performance throughout 2025, weathering trade friction and continued higher interest rates, while maintaining sound fundamentals, balance sheet strength, and disciplined access to capital markets, as demonstrated by Nareit’s REIT Industry Tracker. Comparing the first three quarters of 2025 to the same period in 2024, aggregate funds from operations (FFO), net operating income (NOI), and dividends paid all increased markedly; FFO is up 6.2%, NOI is up 4.7%, and total dividends paid are up 6.3%.

Strong Operational Performance by REITs

Comparing the first three quarters of 2025 to the same period in 2024

6.2%

Increase in FFO

6.3%

Increase in total dividends paid

Despite this operational performance, U.S. REITs spent much of 2025 with their valuations stuck in neutral as generalist investors bid up the valuations of tech stocks. This dynamic—reminiscent of the late 1990s tech boom—resulted in a striking divergence between REIT and broader valuation multiples.

Nareit’s analysis of the broad equity-REIT valuation ratio, as depicted above, shows that the gap between equity and REIT valuations today is only rivaled by what was seen during the global financial crisis and the early months of the COVID-19 pandemic. This divergence adds to a persistent gap between REIT and private real estate valuations, which is now the longest of its kind since the early 2000s.

The outlook explains why it’s a question of when, not if, these valuation gaps close—and how REITs and their investors are positioned to benefit from relative outperformance and renewed opportunities for accretive acquisitions.

REITs and Institutional Investors

Nareit’s conversations with investors in 2025 highlighted a recurring theme: many market participants still underestimate how widely REITs are integrated into real estate portfolios and are unaware of how institutional investors are continually evolving their use of REITs. Today, more than 70% of U.S. pensions by assets incorporate REITs into their real estate strategies, and usage is even higher among the largest, most sophisticated plans; more than 75% of pension plans with above $25 billion in assets use REITs.

Leading institutional investors, including pensions and sovereign wealth funds, are expanding their use of REITs, drawn to their higher total returns, strong operations, scale, access to emerging sectors, and efficient global exposure. Nareit’s compilation of case studies highlight how institutions are using REITs to meet key portfolio objectives, including completion strategies. The outlook builds on this work by presenting three new real-world examples of how leading investors are integrating REITs into their real estate allocations.

Reflecting investor conversations, the outlook also addresses a frequent question about REITs and portfolio completion strategies: how have these strategies performed through the pandemic and sharp rise in interest rates? As demonstrated in the chart above, Nareit’s comparison of model portfolios, which starts at the beginning of 2020, shows that after a bumpy start in early 2020 and a difficult 2022 as rates surged, REIT-based completion portfolios meaningfully outperformed a status quo approach.

Global REITs and Listed Real Estate

Another frequent question from investors focuses on the added value of global REIT investing compared to a U.S.-only strategy. This is a reasonable question; over the past five- and 10-year periods, U.S. REITs—and the broader North America region of the FTSE EPRA Nareit Developed Index—meaningfully outperformed Europe and Asia. Yet 2025 provided a powerful reminder of the benefits of global diversification. The volatility driven by trade policy uncertainty and sharp dollar declines against global currencies combined to highlight the value of global investing. As of the end of November, the FTSE EPRA Nareit Developed Index returned 10.6% versus the U.S.-only FTSE Nareit All Equity Index at 4.5%. During 2025, the Americas total return (5.5%) significantly lagged Asia (28.0%) and Europe (19.9%).

As shown in the map above, the FTSE EPRA Nareit Global Real Estate Index illustrates the returns of real estate companies in all regions, illustrating how real estate markets perform differently around the world. The outlook provides an in-depth analysis of 2025 performance and the power of global diversification, complemented by a detailed examination of the portfolios of actively managed mutual funds and ETFs specializing in global real estate. That examination provides a unique outlook on the use of global real estate, showing active managers’ allocations by region and sector.

2026 has the potential to generate new opportunities for REITs and their investors.

Looking ahead to 2026, Nareit will continue to meet with investors across the globe, providing research, insights, and practical examples of how REITs can help them navigate uncertainty while offering significant benefits. Whether through valuation convergences, renewed transaction activity, or the expanding role of global listed real estate, 2026 has the potential to generate new opportunities for REITs and their investors.

Commercial Real Estate and REITs: Dual Divergences Set Stage for REIT Rebound in 2026

Kyle Gustafson — Fri, 05 Dec 2025 14:34:18 +0000

Commercial Real Estate and REITs: Dual Divergences Set Stage for REIT Rebound in 2026 Kyle Gustafson Dec. 5 2025

Key Takeaways

REITs delivered resilient operating performance and maintained reliable access to capital markets during a volatile and disruptive 2025.
REITs’ disciplined balance sheets and low debt costs position them for continued growth in 2026.
Going into 2026, REITs are experiencing two divergences: a prolonged gap between public-private real estate valuations and a dramatic, persistent divide between REIT and broader equity valuation multiples.
It’s a question of when, not if, these divergences end, and based on past cycles, the coming convergences will likely favor REIT outperformance.
As markets converge and transactions increase, REITs are well-positioned to make acquisitions and benefit from accretive growth

The Rise and Fall of Economic and Financial Market Uncertainty

Throughout 2025, the economy and financial markets experienced significant uncertainty and volatility, largely driven by concerns over changes in U.S. trade policy, the nation’s fiscal sustainability, geopolitical tensions, and the federal government shutdown. After a period of turbulence, the marketplace seems to be more stable. As broad uncertainty measures have returned to beginning-of-year levels, financial markets appear to have priced in less economic turmoil going forward.

The charts above exhibit the Bloomberg Consensus Forecast Survey’s probability of a recession in 12 months, the Cboe VIX Index, and the Baa corporate bond yield spread over 10-year Treasuries for January 2025, April 2025 (post-Liberation Day peaks), and November 2025. The VIX, often referred to as the “fear index,” tends to rise with increased market stress. Baa is the lowest investment grade corporate bond rating and its spread over Treasuries captures perceived bond market risk, with wider spreads reflecting increased risk.

Each uncertainty measure started the year at a low level, reached its maximum level post-Liberation Day, and then fell as investors and markets became more comfortable with the prevailing environment.

While uncertainty metrics may have come full circle in 2025, some indicators suggest that the U.S. economy may be slowing. A softening job situation and modestly rising inflation motivated the Federal Open Market Committee to reduce its target policy rate range by 25 basis points (bps) to 3.75% to 4.00% at its October 2025 meeting. Looking forward, federal data reporting delays related to the government shutdown may limit clarity, but available public and private data sources still suggest that the economic outlook, while weakening, does not likely portend a significant slowdown.

REITs have continued to deliver solid operational performance and maintained well-structured balance sheets with low leverage.

REIT Fundamentals Remain Strong

In challenging economic and financial market conditions, REITs have continued to deliver solid operational performance and maintained well-structured balance sheets with low leverage. While this has been a consistent theme over the past several years, it has been underappreciated by investors.

The chart above presents quarterly year-over-year net operating income (NOI) and same-store net operating income (SS NOI) growth rates for U.S. public equity REITs from the third quarter of 2024 to the third quarter of 2025.

As of the third quarter, REIT year-over-year NOI and SS NOI growth rates were 5.2% and 2.8%, respectively. More than 60% of REITs posted positive year-over-year NOI growth rates; more than 50% had year-over-year SS NOI gains. Continued solid operational performance in a challenging market is a testament to REITs’ asset selection and management expertise.

Using data from Nareit’s quarterly REIT Industry Tracker the chart above shows REIT balance sheet metrics for the fourth quarter of 2021 and the third quarter of 2025. The data from the fourth quarter of 2021 showcases the state of REIT balance sheets before the surge in the 10-year Treasury yield in 2022. Since then, interest rates have remained elevated.

In difficult times, the strength of a company’s balance sheet often takes center stage. Across the two time periods, REITs have proven to be excellent stewards of their balance sheets. REITs’ emphasis on fixed rate debt and longer terms to maturity have limited their exposure to higher interest rates and highlighted their focus on long-term investment. Access to unsecured debt has also provided REITs with a competitive advantage, while low debt costs have afforded them considerable operational flexibility to address property and firm needs.

Dual Divergences Set the Stage for REITs in 2026

REITs are currently experiencing dual divergences. Public and private real estate values have reached a record long cycle of divergence that began in 2022, when interest rates rose dramatically. Starting in 2023, a striking divergence between REIT and broader equity valuations emerged, driven largely by the outperformance of AI-linked tech stocks. Each of these divergences may individually set the stage for REIT relative outperformance and growth in 2026 and beyond.

Public-Private Real Estate Valuation Divergence Could Close in 2026

Historical data indicate that public and private real estate valuations have reached their longest period of divergence. The public-private real estate cap rate spread has been slow to close and remains wide; it stood at 112 bps in the third quarter of 2025. While the market-driven REIT implied and private transaction cap rates have essentially been in sync with one another, private appraisal cap rates seem entirely disconnected from transaction markets, maintaining only a slight premium to the 10-year Treasury yield.

The chart above displays the maximum public-private cap rate spreads and peak-to-trough durations measured in quarters for the four major property valuation divergences since 2000. It shows that:

The 2000 and 2009 real estate valuation divergences occurred during the dot-com bust and global financial crisis, respectively. Both dislocations had significantly higher peak cap rate spreads, but shorter convergence times than their successors.
The 2018 and 2022 dislocations may have been milder, but both tended to linger. The 2018 divergence spanned a brief recession, but its convergence was probably postponed by COVID-19; its return to equilibrium took 12 months.
The current valuation divergence sparked by the 2022 surge in the 10-year Treasury has now reached the record of 12 months. Public-private cap rate spreads are narrowing but still exceed 100 bps—suggesting convergence may be approaching in 2026, though the dislocation is not over yet.

As public and private real estate values become more aligned, a revival in today’s anemic property transaction market is anticipated. While the public-private real estate valuation convergence appears to be on the horizon, real estate transaction volume data have already highlighted an uptick in recent activity.

REIT-Equity Market Valuation Divergence Presents Buying Opportunity

The second divergence is between the broad equity market and REIT valuation multiples. The recent strong performance of the U.S. equity market relative to REITs—driven in large part by the outperformance of AI-linked tech stocks—has resulted in equity valuation multiples soaring above similar REIT metrics. While this type of dislocation has been uncommon, history shows that as these metrics move back toward equilibrium, REITs have tended to outperform broad equities.

The chart above depicts the S&P 500 forward (next 12 months) price to earnings ratio (P/E) divided by the equity REIT forward price to funds from operations ratio (P/FFO). It also shows an average of the valuation quotients since the first quarter of 2006. Valuation quotients greater than 1 indicate that equity multiples were greater than REIT multiples, and vice versa.

REITs have tended to outperform broad equities as the gap between the valuation multiple metrics closes.

Since 2006, the average ratio of the S&P 500 P/E to equity REIT P/FFO has essentially been 1. This ratio was significantly elevated during three periods: the global financial crisis, the COVID-19 pandemic, and the recent AI-driven tech rally. These dislocations have traditionally presented buying opportunities for REIT investors. While past performance is not indicative of future results,REITs have tended to outperform broad equities as the gap between the valuation multiple metrics closes. For example:

During the global financial crisis, the broad equity-REIT valuation ratio peaked at 1.7 in the first quarter of 2009. Four quarters later, it was 0.9. That is because during this period, the FTSE Nareit All Equity REIT index posted a total return of 106.7% while the S&P 500 gained 49.8%. REITs outperformed broad equities by 56.9%.
During the COVID-19 pandemic, the broad equity-REIT valuation ratio peaked at 1.2 in the fourth quarter of 2020; it was 0.9 by the fourth quarter of 2021. Over that time, the FTSE Nareit All Equity REIT and S&P 500 indices posted total returns of 41.3% and 28.7%, respectively, resulting in REITs outperforming by 12.6%.
Along with the current AI-related tech rally, the broad equity-REIT valuation ratio started to rise during 2023. Although the ratio has fluctuated, it has remained elevated; it stood at 1.3 in the third quarter of 2025. Similar to the current public-private real estate divergence, this broad equity-REIT valuation dislocation has lingered.

Dual Convergences and the Promise for REITs

While it is difficult to time the end of a market dislocation, historically both types of divergences have had their own convergences which were marked by REIT relative outperformance. Although the length of the REIT–equity dislocation is still unknown, the potential tightening of the public-private cap rate gap in 2026, combined with rising transaction activity, point to a possible valuation convergence ahead.

The chart above presents four-quarter and peak-to-trough total return differences between public and private real estate after each of the four major cap rate spread peaks. Total return differences were calculated using FTSE Nareit All Equity Index (FTSE Nareit) and National Council of Real Estate Investment Fiduciaries Fund Index–Open End Diversified Core Equity (NFI–ODCE) data. Positive values indicate REIT outperformance. All performance metrics reflect cumulative total returns. Note that the current divergence (Q3:2022) is not yet over.

After each of the four major peaks, REITs outperformed private real estate on both four-quarter and peak-to-trough total return bases. The four-quarter REIT total return outperformance ranged from 8.3% to 124.7% and averaged 41.7%. The peak-to-trough REIT outperformance ranged from 17.1% to 124.7% and averaged 56.6%.

REITs Positioned for Growth in 2026

When property valuations converge and the transaction market regains its footing, REITs are poised to be in an enviable position on the acquisitions front. With private real estate capital raising in the doldrums and bank financing constrained, REITs’ disciplined balance sheets and reliable access to capital—through debt, equity, and other forms of financing like joint ventures with large institutional investors—will provide important distinctions in the marketplace. Taken together, these strengths position REITs to enter a growth cycle in 2026.

Mid-Year Update: REITs Positioned to Weather Volatility, Pursue Growth

Kyle Gustafson — Thu, 10 Jul 2025 19:10:07 +0000

Discover how REITs are navigating interest rates, trade tariffs, and market volatility with strong balance sheets and growth-focused strategies.

REITs in 2025: Finding Opportunities in a Changing Real Estate Market

Kyle Gustafson — Wed, 11 Dec 2024 13:33:36 +0000

REITs in 2025: Finding Opportunities in a Changing Real Estate Market Kyle Gustafson Dec. 11 2024

On balance, 2024 has been successful for REITs. They have adeptly weathered higher interest rates, while maintaining enviable balance sheets and access to capital markets. REIT operating performance also has been sound. Comparing the first three quarters of 2024 to the same period in 2023, aggregate net operating income and dividends paid are each more than 3% higher.

In addition, REIT share price performance has been impressive. Through Nov. 30, 2024, total returns for the FTSE Nareit All Equity REIT Index were 14%, well above the 25-year average of nearly 10%. While REITs lagged the broader stock market, they significantly outperformed private real estate. Through the third quarter, REITs outperformed private real estate (measured by the NCREIF ODCE index) by more than 17 percentage points, as private real estate valuations continue to slowly price-in higher interest rates.

In 2025, there is a real possibility for an environment with both moderating interest rates and robust economic growth, otherwise known as an economic soft landing. Nevertheless, there are both lingering and emerging risks, including soft property fundamentals in some sectors, higher interest rates reflecting fiscal imbalances, and the possibility that shifting tariff policies could restrain commercial real estate (CRE) performance in 2025.

Overall, in a world that will be marked by increasing and accelerating change, we see opportunities for REITs in 2025. Specifically, we expect REITs to:

find accretive growth opportunities as CRE transactions increase;
continue leading globally as they embody the megatrends that will define real estate for the next decade: specialization, scale, innovation, and sustainability; and
make critical inroads with institutional investors seeking efficient access to CRE with those characteristics.

Commercial Real Estate and REITs

In our broad CRE and REIT Outlook, we consider the three keys to a more dynamic CRE market in 2025: an economic soft landing, public-private real estate valuations returning to equilibrium, and a resulting property transaction market revival.

The rate-hiking cycle has been marked by the wide and persistent valuation divergence between REITs and private real estate, as REIT valuations adjusted to reflect higher interest rates in 2022, while private valuations have moved more slowly. Last year, we predicted that the convergence process would gain speed in 2024 as private real estate repriced and REITs outperformed their private counterparts. That prediction was correct. We show that the cap rate spread between private real estate and REITs fell from 212 basis points (bps) at the end of the fourth quarter in 2023 to just 69 bps at the end of the third quarter in 2024.

As public and private real estate values become more in sync, there likely will be a revival in the currently stalled CRE transaction market. REITs’ disciplined balance sheets and ready access to capital—through debt, equity and other forms of financing such as joint ventures with large institutional investors—will provide an important distinction in the current market. Though bank financing for real estate is improving, it remains challenging. With private real estate capital raising in the doldrums, REITs are well-positioned to enter a growth cycle, by taking advantage of their disciplined balance sheets and access to cost-advantaged capital to pursue accretive growth opportunities.

Global REITs and Listed Real Estate

As the REIT approach to real estate investment becomes increasingly global, it is important to analyze the U.S. REIT market in the context of the global REIT landscape. The FTSE EPRA Nareit Developed Index was up nearly 10% at the end of November 2024. Throughout 2024, U.S. REITs, particularly the U.S. health care and data center sectors, led the index as returns in Europe and Asia lagged the Americas.

Taking a broader perspective, we identify and discuss four megatrends that have and will shape the global real estate landscape: specialization, scale, innovation, and sustainability.

These megatrends are progressing across the Americas, Europe, and Asia, creating current and future growth opportunities. Importantly, each one reflects different aspects of REIT and listed real estate’s inherent strengths and advantages.

REITs and Institutional Investors

Leading institutional investors, including pensions and sovereign wealth funds, are increasingly understanding the importance of the megatrends discussed above and, critically, that REITs offer easy access to cutting edge real estate. This accelerated in 2024, and we expect it to continue in 2025, as institutional investors increasingly recognize that REITs have historically provided both higher total returns and world class operational performance, impressive scale, strategic access to new and emerging property sectors, efficient access to global real estate, and leading sustainability performance.

In this outlook, we also summarize four case studies showing how institutional investors are tactically and strategically using REITs to meet their real estate portfolio objectives, which include increasing property sector diversification, increasing geographic diversification, and increasing returns through tactical allocations to REITs.

Over the last two years, REITs have proved that they are adept at navigating the higher interest rate environment. In 2025, we are cautiously optimistic that we will see a more robust CRE market with more transaction activity. These transactions will provide REITs with opportunities for accretive growth, particularly given that REITs will continue to have access to various capital sources and well-managed balance sheets. At the same time, we expect REITs to keep making inroads into institutional real estate portfolios, as leading investors increasingly use REITs to access their high-quality properties, world-class operating platforms, and commitment to innovation.

Listen to a podcast about the 2025 REIT Outlook:

Mid-Year Report: Key Themes for the Second Half of 2024

Kyle Gustafson — Wed, 10 Jul 2024 13:16:46 +0000

Mid-Year Report: Key Themes for the Second Half of 2024 Kyle Gustafson Jul. 10 2024

As we look ahead to the second half of 2024, the economic and commercial real estate (CRE) environment will be shaped by the higher interest rate environment, expectations around when the Federal Reserve may begin easing monetary policy, and the continued rapid digitalization of economic activity.

Our outlook for CRE and REITs in the second half of the year highlights four key themes:

REIT operational performance has been solid. High absolute and relative occupancy rates in the face of supply-demand imbalances showcase REITs’ prowess in asset selection and management.
Disciplined balance sheets are enabling REITs to enjoy greater operational flexibility and face less stress than their counterparts with higher debt loads and costs.
Public real estate outperformance continues. On a cumulative total return basis, public real estate has outperformed its private market counterpart by nearly 33% over the last six quarters. Despite this outperformance, the public-private valuation divergence also continues. With capitalization (cap) rate spreads remaining wide, there is likely more fuel in the tank for REIT outperformance in 2024.
REIT occupancy rate and pricing advantages have combined to suggest that REITs offer more for less and present an opportunity for real estate investors.

The start of the third quarter of 2024 marks roughly two years of divergence between REIT and private real estate valuations. While the valuation gap is slowly closing, this extended adjustment period continues to offer an attractive entry point for institutional investors to add REITs to their real estate strategies.

Over the past year, Nareit has published several case studies demonstrating how REITs have been leaders in providing access to new and emerging property sectors, global real estate, and best-in-class sustainability performance—and how these attributes are driving institutional investors to increasingly use REITs to "complete" their real estate portfolios. (Read more about how the Teacher Retirement System of Texas, the Employees Retirement System of Texas, and CenterSquare Investment Management each approached adding REITs to their portfolios.)

In this mid-year report, we examine how the investment strategies for large, actively managed, dedicated REIT funds have evolved. The analysis shows that REIT managers have increasingly shifted their exposures to capture new and emerging sectors, while maintaining overweight positions in industrial and residential sectors.

Like in the United States, REIT and listed real estate returns around the globe are reflecting the prospect of higher interest rates. The performance of the countries, regions, and sectors underlying the FTSE EPRA Nareit Global Real Estate Index Series do not behave uniformly. Our review of global listed real estate returns highlights these important differences, which can provide investors with important diversification opportunities.

Listen to John Worth discuss the 2024 Mid-Year Report on this episode of the REIT Report Podcast.

Subscribe to the podcast on your listening platform of choice.

REITs: Late 2023 Performance Suggests Brighter Outlook for an Evolving Industry in 2024

Kyle Gustafson — Mon, 04 Dec 2023 19:03:51 +0000

REITs: Late 2023 Performance Suggests Brighter Outlook for an Evolving Industry in 2024 Kyle Gustafson Dec. 4 2023

As we look ahead to 2024, the high interest rate environment will likely continue to broadly impact both commercial real estate (CRE) and REITs. The rapidly emerging consensus is that the Federal Reserve is entering a new, more accommodative period that increases the prospects for stabilizing and even declining interest rates.

Even in this new phase of monetary policy, the current high level of interest rates will continue to affect CRE. Nevertheless, we are cautiously optimistic that despite those challenges, the REIT recovery could begin next year. The impressive performance of REITs during late October and November may be a signal that, as in previous periods of monetary policy adjustments, the end of the rate-rising cycle will herald a period of REIT outperformance.

Despite that late-year surge, it is unlikely that 2023 REIT returns will create lasting happy memories for investors. However, as we look back on 2023, we note two key trends that we believe will gain increasing traction in 2024 and beyond.

First, despite higher interest rates, REIT consolidation will continue; there were seven public REIT-to-REIT mergers within the same property sector announced in 2023 with a total deal value of $52.8 billion. These mergers underscore the benefits of having scope, scale, and a robust operating platform in real estate, the last of which is a natural advantage for REITs.

The second trend that will gain traction in the coming years is that REITs will continue to create and provide notable access to new and emerging property sectors as the economy evolves. In 2023, this has been evident in the increased demand seen for REIT data center space, fueled by the artificial intelligence boom, as well as the creation of the gaming real estate sector in the FTSE Nareit U.S. REIT indexes. REITs will also continue to provide access to global real estate and industry leading sustainability performance.

Looking at the broader landscape, our outlook for CRE and REITs highlights three themes: REITs historically have had impressive outperformance at the end of Fed tightening cycles, the public-private CRE valuation divergence will continue to close, and REITs are well positioned to navigate a prolonged period of high interest rates.

Though REITs have typically experienced relative total return underperformance during Fed tightening cycles, they have outperformed both private real estate and equities in post-rate hike periods. With the Fed at or near the end of its interest rate hike cycle, this bodes well for 2024 REIT performance.

Meanwhile, the wide valuation divergence between REITs and private real estate, which has been surprisingly and stubbornly slow to close, presents meaningful opportunities for investors to arbitrage between the two markets. We expect the convergence process to gain speed in 2024 as private real estate reprices and REITs recover. Though the higher interest rate environment will continue to create challenges for CRE in 2024, we believe that REITs are well-positioned for higher rates because of their strong balance sheets. These disciplined balance sheets have also made REITs well-prepared for market uncertainty, while paving the way for potential opportunistic real estate acquisitions. As further discussed in our CRE outlook, we believe REITs provide an important tactical advantage at this point in the real estate cycle.

We believe that REITs are well-positioned for higher rates because of their strong balance sheets. These disciplined balance sheets have also made REITs well-prepared for market uncertainty, while paving the way for potential opportunistic real estate acquisitions.

Institutional investors also are increasingly understanding that REITs offer significant tactical advantages and strategic opportunities, and as a result should be included in their real estate portfolios. We expect this trend to continue in 2024, because institutional investors are recognizing that REITs have historically provided benefits in terms of higher total returns and strategic access to new and emerging property sectors and global real estate, all while exhibiting leading sustainability metrics.

In this outlook, we summarize four case studies showing how institutional investors are tactically and strategically using REITs to meet their real estate portfolio objectives, which include increasing property sector diversification and increasing returns.

In addition to the case studies, we graphically show the evolution of REIT property sectors by market capitalization and the growth of the REIT and listed real estate opportunity set globally.

Our outlook wouldn’t be complete without examining the global REIT landscape. Though REITs and listed real estate underperformed broader markets in 2023, they seemed to have turned a corner late in the year. Through mid-October, the year-to-date total returns of the FTSE EPRA Nareit Developed Extended Index were -7.6% but since mid-October the index has gained 13.4%, outperforming the broader market. However, the performance of the countries, regions, and sectors underlying the index series do not behave uniformly. Our review of global listed real estate returns highlights these important differences and considers how opportunities for access to new and emerging property sectors are emerging globally. In 2024, we believe the global footprint of REITs and listed real estate companies will continue to expand, with digitally driven real estate likely to account for a growing share of that enlargement.

The past two years have been challenging for REIT returns, as the Fed ramped up its fight against inflation. The REIT industry, however, has continued to evolve and it appears that a recovery is likely on the horizon in 2024 and beyond.

Listen to John Worth discuss the 2024 REIT Outlook on the REIT Report Podcast:

John Worth is the executive vice president for research and investor outreach at Nareit. He conducts REIT-focused research, works with Nareit's sponsored research partners, and participates in outreach activities with investors, analysts, and policymakers.

Nareit, EPRA, FTSE-Russell Meet with Investors in Qatar and United Arab Emirates

pconnors@reit.com — Fri, 27 Oct 2023 18:25:06 +0000

Nareit, joined by the European Public Real Estate Association (EPRA) and FTSE-Russell LSEG, completed a successful visit to Doha, Qatar, and Abu Dhabi and Dubai in the UAE last week.

REITs Complete Institutional Real Estate Portfolios: A Case Study of the Korean National Pension System

pconnors@reit.com — Fri, 12 May 2023 16:36:14 +0000

One of the dominant themes among institutional real estate investors over the past few years has been the shift toward “alternative” property types.

REITs Complete Institutional Real Estate Portfolios: A Case Study

pconnors@reit.com — Thu, 30 Mar 2023 15:14:06 +0000

One of the dominant themes among institutional real estate investors of the past few years has been the shift toward “alternative” property types.

Nareit, EPRA, FTSE-Russell Visit Persian Gulf

pconnors@reit.com — Mon, 24 Oct 2022 18:00:35 +0000

The team conducted meetings with the largest sovereign wealth funds in the region, local asset managers, and REIT managers.