Rising rates were long cast as landlords’ arch-nemesis — until now. Even with higher borrowing costs, REIT earnings growth is accelerating to 9% this year, and a similar pace is expected next year. Stronger fundamentals are doing the heavy lifting for a sector long treated as a low-rate trade.
- Executives are raising the bar — 58 of the 98 REITs offering full-year guidance have lifted their outlook, according to Hoya Capital.
- Valuations look attractive next to equities, says Cohen & Steers — adding that cash flow growth is improving as new supply peaks.
The split screen: This year, hotels, senior housing and data centers have led REIT returns, yet Allan Gray wants no part of that last one. The Australian firm says data-center valuations are too rich for the risks, including changing technology and uncertain tenants. Office REITs, by contrast, were its equity fund’s largest area of deployment over the past year. Its investment chief says investors are pricing lasting AI disruption into those stocks, and Allan Gray expects a rebound. That’s a win for Michael Scott’s paper sales department.
