Public REITs are kicking off 2026 with healthy balance sheets, good underlying fundamentals, access to capital, and limited new supply—factors which all bode well for solid near-term performance.
Overall, portfolio managers’ generally favorable outlook for the industry is magnified by many REITs trading below net asset value (NAV). At the same time, performance is likely to be mixed across sectors, as major trends including the aging baby boomer population, AI’s explosion, and demand for digital infrastructure impact demand and capital flows.
REIT.com recently spoke with Benjamin Bronner, portfolio manager and senior credit analyst at PIMCO, Charles Harbin, managing director, co-head and portfolio manager, public real estate securities, at Heitman, and Curtis Yee, portfolio manager, global real estate securities, at BlackRock, to get their views on the opportunities and challenges they see ahead for public REITs.
From a high-level perspective, how do you see macro fundamentals shaping up for REITs in 2026?
Benjamin Bronner: The macro environment is constructive, given a base case expectation for a soft landing, declining supply, and increasingly liquid CRE debt markets. However, there is substantial nuance under the hood that will impact property sectors disparately, including the interplay between resilient AI investment, the K-shaped economy, labor market conditions, and consumer sentiment.
Additionally, the outcome of the Supreme Court ruling on tariffs and the potential for questions surrounding Federal Reserve independence paint a less clear picture for rates further out the yield curve. Within REIT portfolios, we are taking a neutral range-bound stance on the 10-year Treasury entering the new year.
Charles Harbin: A large majority of REIT sectors are fundamentally healthy, with declining supply giving us conviction for continued mid-single digit earnings growth and durability of the 4% dividend yield into 2026.
Regarding potential multiple expansion, REITs are historically cheap versus broad equities and appraised values, which positions them well for outperformance on a less hawkish Fed and broadening investor interest beyond AI. It is also worth a reminder, especially to generalist investors, that REIT fundamental drivers are not uniform given the diversification of sectors with their various demand drivers and degrees of cyclicality.
Curtis Yee: We go into 2026 with a more stable macro backdrop than in recent years. The big reset in the cost of capital has already happened, disinflation is progressing (albeit unevenly), and policy rates have likely peaked across most major economies. Against that backdrop, the combination of discounted valuations, solid cash flow growth, and wide-open access to capital underpins a constructive top-down view for REITs in 2026.
A defining feature of the current cycle is the divergence between very strong capital investment and weaker labor trends. Corporations are investing aggressively in automation, digitalization, and supply chain resilience, even as labor markets cool at the margins.
For REITs positioned on the capital investment side of this divide, the macro environment is increasingly constructive. While the K-shaped economic dynamic is likely to continue, forthcoming tax refunds and possible tariff-related credits may offer support to lower-income consumers and the real estate categories with most exposure to them.
What are likely to be some of the key themes in private versus public real estate investing in the coming year?
Harbin: The potential private real estate penetration into the defined contribution space is likely to be a continued focus. While we believe private real estate deserves an allocation in plans, the relatively high fees and low liquidity versus public REITs need to be compensated for with higher private returns—yet public REITs tend to outperform. The relative volatility of public real estate given the lack of benefit from appraisal smoothing may remain a focus, but we suggest investors consider volatility in the context of their time horizons.
Yee: Private development pipelines are at multi-decade lows due to higher financing costs and construction inflation, while infrastructure-like assets continue to attract ample private capital. This bifurcation reinforces elevated replacement costs and supports rents for existing, well-located assets.
Public markets, meanwhile, continue to serve as the liquidity and price-discovery mechanism for the entire asset class. With many listed REITs trading at discounts to private market values, we expect allocators that are looking to avoid illiquid private structures to continue using public real estate to express long-term thematic exposure.
Bronner: Numerous public REITs trade at discounts to private market values. At a minimum, this sets the stage for increased asset sales and share buybacks, if not larger M&A activity, with activists already engaging various companies across sectors such as industrial and cold storage.
Additionally, private markets are likely to see continued capital formation, deployment, and debt issuance across almost every channel in support of data center development and AI infrastructure. From an asset allocation perspective, setting data centers aside, public REITs serve as a hedge and diversifier across institutional portfolios increasingly exposed to the AI megatrend.
Which property sectors are you most enthusiastic about for 2026?
Yee: We see the strongest multi-year fundamental tailwinds where structural demand meets constrained supply. On that basis, health care-related real estate, particularly senior housing, post-acute care, and medical office, stands out. The first baby boomers turn 80 in 2026, and the demographic wave in front of these assets is unprecedented. Yet supply has been held back by labor shortages, construction cost inflation, and higher financing costs. That sets up one of the most favorable landlord environments the sector has seen, with improving pricing power as demand grows into constrained stock.
Digital infrastructure, especially data centers, is also compelling. AI investment is reshaping land, power, and grid economics. Demand for capacity already exceeds available supply in many markets, and operators that control energized land or have strategic grid adjacency can secure power earlier, build faster, and translate that into superior pricing and development returns.
Bronner: Health care remains our highest conviction sector entering 2026, especially names exposed to private-pay senior housing. We see these REITs as a fundamentally defensive exposure that can continue to invest, grow into their valuations, and capably navigate a wide range of economic scenarios. The property sector continues to benefit from exceptionally strong fundamentals on the back of an aging baby boomer cohort, resilient housing and equity markets to support fees, as well as declining supply exiting the pandemic.
Harbin: In the case of senior housing, we see a catalyst for further valuation expansion by investors continuing to increase growth assumptions as time progresses. Strip center retail and certain geographies within office and apartments are our more contrarian views. Strip centers underperformed in 2025, despite continued near-record leasing demand and rent economics. We believe their consistent mid-single digit earnings growth will show comparatively well over time. The set up in strip retail feels similar to 2024, when strips outperformed.
Regarding office, return to office has gone from a headwind to a tailwind that is more than mitigating weak job growth, as evidenced in strong leasing volumes and expanding pipelines that rival 2019. Additionally, supply is almost nonexistent, which will further support fundamentals for three to four years given construction times.
We are also bullish on apartment REITs, with Bay Area exposure primarily on AI-driven job growth creating the potential for above average revenue and earnings growth in 2026. The risk/reward in apartments is especially attractive given the current cheapness relative to historical levels.
How are you feeling about REIT balance sheet fundamentals going into 2026?
Bronner: REIT balance sheets enter 2026 on solid footing and well-positioned by historical standards in our view, including multiple turns lower leverage compared to levels entering prior periods of market stress. Balance sheets are flexible and predominantly unencumbered, with well-laddered maturities and largely healthy liquidity profiles. The unsecured bond market is wide open for nearly all issuers, while liquidity continues to improve across bank lending and CMBS.
Yee: REIT balance sheets are on solid footing. The sector has already absorbed the reset in the cost of capital, and 2025 marked a clear reopening of capital markets across debt, preferreds, convertibles, and JV equity. Companies have termed out maturities and reduced asset-level leverage, enabling them to utilize capital markets opportunistically rather than defensively.
Harbin: Great. Leverage remains below historical averages with public REITs learning their lessons from the 2008 financial crisis. Additionally, the corporate unsecured bond market has been very supportive for REITs and a continued advantage over private real estate markets.
Where do you see the biggest mispricings going into 2026?
Bronner: One property sector that continues to screen cheap on our models, which consider a wide range of valuation signals, is apartments. However, it is important to remember stocks can be cheap for a reason and/or remain so, absent catalysts. In this context, and assuming labor conditions hold, we expect the market could turn friendlier towards apartment REITs in the first half ahead of an improving supply picture in the second half, particularly for those exposed to the Sunbelt.
Yee: Within real estate, the most interesting opportunities are where capital scarcity has crushed development, but demand remains stable or improving. With vacancies nearing a peak in many markets and supply pipelines extremely thin until at least 2028, landlords in supply-constrained sectors should see ongoing rental growth that is not fully priced into public valuations.
We also believe the market is underestimating the duration and intensity of AI-related demand for power-rich, grid-adjacent real estate. Conversely, we are cautious on cheap stocks that lack a compelling earnings or value realization story.
Are there specific priorities you want to see REIT management teams focus on in the coming year?
Bronner: In 2026, we look for management teams to effectively communicate achievable expectations with respect to guidance and capital planning, expand margins where possible, as well as heed cost of capital signals; investing for growth (organic or inorganic) when granted a material premium, and exploring asset sales or share repurchases at discounts.
Harbin: Given the recent cycle’s capital flows preferring private over public, we would like REIT management teams to spend more time advocating to their institutional capital contacts on the advantages of REITs.
Yee: We want management teams to be active rather than passive. The market is rewarding companies that develop accretively, recycle capital out of non-core or lower-return assets, repurchase undervalued shares when appropriate, and drive operating improvements. Waiting for the macro environment to improve is not a strategy.
We would also encourage management teams to lean into their structural advantages, whether that’s demographic tailwinds, strategic land and power positions, or exposure to supply chain resilience. Companies that articulate clear, credible strategies around these themes, and execute against them, are best positioned to outperform in 2026.