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Global real estate investment trusts (REITs) traded roughly flat in the first quarter of 2025 due to concerns over the 10-year Treasury bond market and tariffs impacting global economic growth. Notable mean reversion occurred, with last year’s outperformers underperforming and vice versa. Non-U.S. REITs outperformed U.S. REITs as investors sought alternatives due to U.S. policy uncertainties. Historically, REITs have fared well in higher-tariff environments due to their domestic demand focus, defensive characteristics, and long-term leases backed by hard assets. The REIT sector has shifted to include more defensive demand sectors like healthcare, accommodations, data centers, and self-storage, reducing its cyclical nature.
In the U.S., REITs produced a modest total return of 0.7% in Q1 2025, outperforming the S&P 500, which declined 4.3%. Despite policy uncertainty from the new administration, near-to-medium-term fundamentals are supportive for the U.S. REIT market due to moderating inflation, rates, and stable-to-improving fundamentals across nearly all property types. Top-performing sectors included healthcare and gaming, while data centers and hotels underperformed due to macroeconomic growth concerns and negative sentiment from AI developments. The European and Asia Pacific markets also showed varied performances, with Europe benefiting from a weaker USD and Asia Pacific REITs gaining from lower bond yields and a flight to safety.
