Third quarter REIT performance and upcoming trends to help benchmark and analyze exposure within the sector were the focus of the Oct. 6 FTSE Nareit U.S. Real Estate Indexes in Review & What’s Next webinar
Hosted by Nareit and Institutional Real Estate, Inc. (IREI), the quarterly webinar featured John Worth, executive vice president of research and investor outreach at Nareit, and
Charles Harbin, managing director, co-head and portfolio manager of the global real estate securities group at Heitman. Mike Consul, senior editor of IREI’s Real Asset Adviser magazine, moderated the discussion.
Beginning with an overview of third quarter REIT performance, Worth explained that although the FTSE Nareit All Equity REITs Index was down 6.1% for the quarter, REITs were up 7.9% year to date. Turning to REIT sectors, Worth noted that every property sector was negative for the quarter, but that year to date, lodging/resorts “were having a very strong year” at 37.6%, followed by data centers (28%), and specialty (23.4%).
Worth and Harbin also discussed many other issues, some of which are highlighted below.
- Interest rates and REITs: Worth explained that though a return to a 2% or 3% rate environment is unlikely, REIT balance sheets are well-structured to modify their businesses to a higher interest rate environment.
- 10-year Treasury and REITs: Harbin added that when he looks at REIT balance sheets and core growth prospects holistically, he “doesn’t see a one-for-one impact from interest rates and 10-year Treasury moves to commercial real estate valuations.”
- 2027 REIT earnings growth: “Consensus estimates range from 7% to 9% with an average of 8+%,” said Harbin, and “that is solid acceleration from 2026 and the highest in recent memory.”
- Valuation divergence between REITs and private real estate: Worth explained that the ongoing valuation gap may close meaningfully in the next couple of quarters. “With private real estate appraisal cap rates sitting at 50-70 basis points below the 10-yr Treasury…The rise in interest rates may be the impetus for some of those appraisal-based valuations to become aligned with the current environment.”
- Institutional investors and REITs Talking about how institutional investors’ use of REITs has evolved, Worth noted that they are increasingly using REITs and private real estate together to get access to different properties, sectors, or to be more opportunistic in the face of the ongoing valuation divergence.
- Data centers: Discussing the opposition toward data centers, Harbin noted that there are two silver linings for REITs. “First, they are long-tenured, experienced developers in terms of being responsible environmentally and investing back in the community. Second, if we snap our fingers and don’t have any more data centers being built, then REITs have scarcity value and rent pricing power.”
Harbin and Worth also answered audience questions about other sectors, including telecommunications, gaming, health care, gaming, and their forecasts for REIT performance in the fourth quarter.
The next IREI/Nareit quarterly performance webinar will be Jan. 12, 2027.