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, along with tariff impacts on global economic growth, limited share price appreciation.

The quarter was marked by a 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.

• United States: We continue to see U.S. REITs as attractive, trading at a slight discount to net asset values compared to long-term average of flat. We wouldn’t be surprised to see increased private-equity activity in 2025. Higher rates are restricting new supply, reinforcing a stable fundamental backdrop and setting the stage for multi-year runway of growth in areas underpinned by secular demand.
• Europe: The European REIT market stays at wide discounts vs. historical averages. Despite a subdued economic growth outlook and political risks, we see a moderated positive outlook for this region on balance.  Private valuations are around their trough in most sectors and countries, and many REITs offer attractive cash flow yields. We remain cautious and underweight structurally impaired sub-sectors such as offices in secondary locations. 
• Asia Pacific: Rising recession risk is emanating from global trade tensions, causing an attendant decline in sovereign bond yields. The declines present a favorable backdrop for REITs, especially names underpinned by strong structural factors that may outperform in a mild inflationary environment. We are positive on select sectors, such as Australia residential and retail REITs that benefit from domestic consumption and declining rates.

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’s 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 the cyclical office and retail property types. We believe active REITs offer investors a portfolio anchor through its steady and inflation-indexed income potential.