First quarter REIT performance, early second quarter performance, and how REITs are positioned amid current market volatility was the focus of the April 8 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 Kristin Kuney, managing director and co-head of liquid real assets at Goldman Sachs Asset Management. Mike Consul, senior editor of IREI’s Real Asset Adviser magazine, moderated the discussion.
Worth noted that REITs “meaningfully outperformed” broader equities in the first quarter, with the FTSE Nareit All Equity REITs Index returning 2.8%. He described performance to-date in the second quarter, in the wake of White House tariff announcements, as a “real shock to the system.” However, he stressed that REITs continue to outperform broader markets.
Telecommunications, health care, and gaming REITs were among the top performers in the first quarter.
So far in the second quarter, REITs are pricing in a significantly higher recession risk, Worth said, while noting that telecommunications and data center REITs are among the most resilient sectors, followed by gaming. Industrial, timber, and lodging/resort REITs have been among the worst hit in the current environment.
Worth and Kuney responded to a series of audience questions covering a range of topics including:
Impact of tariffs more broadly: Kuney explained that there could be a number of positive aspects to real estate and real assets if more manufacturing jobs come back to the United States, but it will take some time for that impact to be felt fully.
Potential tax cuts: Worth predicted that the process of trying to extend the 2017 tax cuts will be a long one, distinguished by “peaks and valleys.” He stressed that Nareit strives for equality of tax treatment for REITs, which has been a successful strategy to date.
Office: Kuney noted that class A office buildings are doing well across most markets, aided by return-to-office mandates and companies addressing their long term space needs. Looking ahead, Kuney said she does not expect a return to pre-covid office activity levels, which means assessing how to shed class B and C office assets.
Cell towers: Active fund managers are long on cell towers and the asset class is represented in portfolios above its market weight, Worth explained. Kuney added that cell tower investment can’t be accessed via private real estate, making REITs a key access point to the sector.
Lodging: Kuney said supply in the sector is down sharply, while demand is expected to be lower, “so overall, we’re more sanguine on hotels.”
Private real estate vs. REIT cap rates: “We think there are still a lot of bargains in the REIT space and those cap rate differentials are one of the reasons we really feel that institutional investors need to have both these tools in their portfolio,” Worth said. “You can’t arbitrage these valuation differences if you’re not in the market.”
REIT 2024 earnings: Worth pointed out that 2024 was a strong year for REITs, marked by continued solid balance sheets.
The next webinar will be July 15 and will analyze second 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’s 2025 REIT Outlook: Read more about Nareit’s outlook for 2025.
- 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.