Q4 2025 Real Estate Securities Outlook: Rate Relief Supports REITs

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

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In Q3 2025, global REITs delivered positive returns, supported by a favorable interest rate outlook, recovering capital markets, and limited new supply. Key global growth drivers included sustained demand for data centers and senior housing, along with a resilient retail sector. Fundamentals in the office and industrial sectors remained mixed, though slowing construction is expected to support future rental growth.

United States

  • The U.S. REIT market delivered a solid 4.4% return in the third quarter of 2025, with improving sentiment driven by attractive relative value and steady fundamentals.
  • Valuations remain attractive, trading at a discount to net asset value, with private equity activity expected to increase.
  • We are overweight senior housing, data centers, and apartments, while remaining underweight coastal industrials due to trade-related challenges.

Europe

  • European REITs underperformed in the third quarter of 2025, posting a negative total return as the market gave back some of its strong first half gains.
  • The market trades at a significant discount to historical valuations, but the growth outlook is subdued by political and economic uncertainty.
  • Our strategy focuses on sectors with structural growth, such as data centers and logistics, while remaining underweight the office market.

Asia Pacific

  • The APAC region outperformed with a 7% return in the third quarter of 2025, driven by anticipation of Fed rate cuts and strong domestic fundamentals.
  • Japanese developers and Australian REITs showed notable strength, while markets like Hong Kong and Singapore also posted positive results.
  • We are overweight Japanese developers, Australian residential and retail REITs, and resilient Singaporean retail REITs.

Looking ahead, we believe the outlook for global REITs appears constructive. An expected easing in monetary policy should provide a tailwind, though rate volatility remains a risk. We anticipate returns will increasingly correlate with earnings as slowing construction supports rental growth across many sectors. This environment could spur renewed private capital interest and M&A activity, especially given attractive U.S. valuations. Leadership is expected from data centers, senior housing, and resilient retail, while selectivity is crucial in office and trade-sensitive industrial markets. Our strategy remains focused on disciplined security selection, prioritizing companies with strong balance sheets and durable dividends.

Read on for the latest REIT market insights.

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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. 

 

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