Q1 2026 Real Estate Securities Outlook: REITs Enter 2026 with Renewed Support

PGIM reviews the REIT market, analyzing regional performance, rates, sector leadership, and opportunities ahead.

Rate Relief Supports REITs 

In the fourth quarter of 2025, global REITs posted mixed but resilient results as markets digested shifting central bank expectations, moderating inflation, and improving fundamentals across several key sectors. Defensive property types outperformed, while data centers continued to benefit from structural demand tied to AI and cloud adoption. Supply remained constrained globally, supporting rental growth outlooks despite macro uncertainty.

 

United States

  • The U.S. REIT market declined slightly in 4Q25 yet delivered a modest return for full‑year 2025 as fundamentals continued to improve. 
  • Valuations remain compelling, with U.S. REITs ending the year well below long‑term averages and supportive of increased private‑market interest.
  • We are overweight senior housing, data centers, industrial, and apartments, driven by strong demographic and technology demand tailwinds, falling construction pipelines, and attractive valuations. 
  • We remain underweight life science-oriented office, gaming, and select West Coast markets.

Europe

  • Despite political and economic uncertainty, European REITs outperformed other major regions for the quarter and ended 2025 on a strong note in USD terms, aided by meaningful currency appreciation.
  • The market continues to trade at large discounts to private valuations, even as private‑market pricing stabilizes and supply remains controlled.
  • We remain focused on logistics, data centers, select residential, and resilient retail, while maintaining an underweight to secondary offices given elevated vacancy and capex needs.

Asia Pacific

  • APAC outperformed globally in 2025, with Japanese developers and Australian REITs showing strong momentum into year‑end on supportive rate environments and improving fundamentals.
  • Japanese REITs stood out for the year, buoyed by rising rents, strategic buybacks, and optimism around future DPU growth.
  • We are overweight Japanese developers, Australian retail and residential, and Singapore retail, while underweight J‑REITs, favoring logistics and residential over sectors lacking clear catalysts.

Looking ahead to 2026, we see a constructive backdrop for global REITs. Attractive valuations, stabilizing interest rates, and sharply reduced construction pipelines create a favorable setup for earnings‑driven returns. Private capital interest is rising, with the potential for increased M&A activity as public‑market discounts persist. We expect leadership from data centers, senior housing, logistics, and select retail, while maintaining disciplined selectivity in office, life science, and trade‑exposed sectors. 
 

Source: PGIM as of December 31, 2025.

The views expressed herein are those of PGIM investment professionals at the time the comments were made and may not be reflective of their current opinions and are subject to change without notice. Neither the information contained herein nor any opinion expressed shall be construed to constitute an offer to sell or a solicitation to buy any security. 

 

Certain information in this commentary has been obtained from sources believed to be reliable as of the date presented; however, we cannot guarantee the accuracy of such information, assure its completeness, or warrant such information will not be changed. The information contained herein is current as of the date of issuance (or such earlier date as referenced herein) and is subject to change without notice. The manager has no obligation to update any or all such information, nor do we make any express or implied warranties or representations as to the completeness or accuracy. Any projections or forecasts presented herein are subject to change without notice. Actual data will vary and may not be reflected here. Projections and forecasts are subject to high levels of uncertainty. Accordingly, any projections or forecasts should be viewed as merely representative of a broad range of possible outcomes. Projections or forecasts are estimated, based on assumptions, subject to significant revision, and may change materially as economic and market conditions change. 

 

This material is being provided for informational or educational purposes only and does not take into account the investment objectives or financial situation of any client or prospective clients. The information is not intended as investment advice and is not a recommendation. Clients seeking information regarding their particular investment needs should contact their financial professional. 

 

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