Second quarter REIT performance and how REITs are positioned to weather market volatility was the focus of the July 15 webinar, “FTSE Nareit US Real Estate Indexes in Review & What’s Next.”
Hosted by Nareit and Institutional Real Estate, Inc. (IREI), the quarterly webinar featured John Worth, executive vice president of research & investor outreach at Nareit, and Brookfield Asset Management’s Brandon Benjamin. Mike Consul, senior editor of IREI’s Real Asset Adviser magazine, moderated the discussion.
Worth noted that the FTSE Nareit All Equity REIT Index fell 0.9% in the second quarter, describing the period as “quite a wild ride” as tariff announcements impacted sentiment. Specialty REITs led the way in the second quarter, posting returns of 14.5%.
Other trends of note included European real estate returns significantly outperforming the U.S., with returns from Developed Asia also well ahead of the U.S. This signifies “a real turnaround in terms of the global returns structure,” Worth said.
The webinar also included observations about
- Data Centers: Underperformance in the sector was triggered by news from China’s DeepSeek regarding its new AI model. Neverthelesss, development continues apace, Worth said, with major players indicating they need enormous amounts of computing power for AI. Demand for data centers is still strong, but maybe not as large as originally thought, he added. Benjamin noted that Brookfield remains “constructive” on the sector but is monitoring the regulatory environment. Supply/demand metrics are “very compelling,” but questions remain, he said.
- Public-Private Valuations: REITs may have overcorrected for higher interest rates, whereas incorporating higher rates on the private side is “still a work in progress,” Worth explained. The continuing valuation gap can be seen as a short-term opportunistic play, or as an entry point into REIT investment, he noted. Benjamin said arbitrage opportunities look “really compelling” in the apartment and strip center sectors. He also pointed to additional opportunities in the retail space, noting that many investors, both in the U.S. and globally, are under-allocated to the sector.
- Office: Dynamics in the sector vary by region, according to Worth. “The quality divide is very real, and it may be growing,” he said. Benjamin added that the flight to quality is not just in the U.S., but is evident in cities including Tokyo, Paris, and London. Commenting on New York City office, Benjamin added that stricter return-to-office mandates have boosted the sector there, alongside a “fear of missing out” with regard to leasing top quality assets.
- Impact of the One Big Beautiful Bill Act: Worth said REITs and real estate came out of the process in a “good position.” He noted that the 199A provisions permanently reduce the tax rate on REIT dividends by 20%, which would be from 37% to 29.6% for the highest tax bracket.
- Growth Stocks: Benjamin stressed the appeal of growth to REIT investors, with companies that can provide that growth broadly outperforming the market. The best growth opportunities today are in data centers, despite their high capex expenditure, and senior housing. “There will be fits and starts from a total return perspective, but as we underwrite the senior housing space we can say ‘this is an asset class that should grow for a number of years at double digit earnings growth.’” Retail is also a growth area, he said, with supply at a 15-year low. “We are still focused on these growth trends, specifically where we can get durable growth,” he added.
The next webinar will Oct. 7 and will analyze third quarter performance of the FTSE Nareit U.S. Real Estate Indexes. Sign up to receive updates about that webinar, other events, and research.
Additional Resources
Nareit 2025 Mid-Year Update: A look at how REITs have performed year-to-date and how they are positioned to respond to market uncertainty,
Nareit Quarterly Research Letter: Get a quick summary of Nareit’s research and analyses.
Nareit Market Commentaries: Read analyses of the macro- and micro-economic fundamentals affecting the REIT and CRE industries.
REIT Market Data: Find daily, monthly, quarterly, and yearly reports on REITs.
Research Library: Don’t miss the latest REIT research.
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