Opportunity Deepens For REITs
PGIM Real Estate reviews how REITs appear attractively priced and may be a stabilising force for investor portfolios.
Global real estate investment trusts (REITs) traded roughly flat for the first quarter of 2025. Investor concerns around the increase in the 10-year Treasury bond market as well as tariff impacts on global economic growth limited share price appreciation.
The quarter was marked by notable mean reversion, with last year’s outperformers significantly underperforming last year’s underperformers. Mean reversion extended to non-U.S. REITs’ outperforming U.S. REITs for the first time in several quarters, as investor uncertainty around U.S. policies caused REIT investors to look elsewhere for real estate exposure.
History has shown that REITs are positioned relatively well in a higher-tariff or tariff-war environment, given the high exposure to domestic demand, defensive demand characteristics and long-term contractual leases backed by a hard asset. The REIT universe property type profile has shifted away significantly from previous market volatility periods to become much less cyclical in its demand profile, with defensive demand sectors like healthcare, accommodations, data center and self-storage becoming much larger parts of the sector than cyclical office and retail property types. We believe active REITs offer investors a portfolio anchor through its steady and inflation-indexed income potential.
Read on for PGIM Real Estate’s latest REIT market review and outlook.
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