After a rally and a rate hike, what’s next for listed REITs?

REITs have had a strong 2026, up 12% through September 15.

This performance has come in the face of rising rates, confirming that REITs are not simply beholden to changes in interest rates.

In light of this strong performance, the question we get from investors is, “Have we missed the rally?”

The simple answer is no.

There are several factors that argue for continued strength for listed real estate through the end of this year and into 2027.

First, we believe REITs are in the early stages of a recovery cycle, as evidenced by recent reporting of second-quarter earnings.

Second, REIT sectors like senior housing and data centers continue to benefit from powerful secular growth trends.

Finally, real estate offers important diversification at a time when many traditional asset classes are less attractive.

With second-quarter earnings season completed last month, the results were encouraging.

As of June 30, 2026. Source: Cohen & Steers.

There is no guarantee that any historical trend illustrated above will be repeated in the future, and there is no way to predict precisely when such a trend will begin. The views and opinions above are as of the date of this publication and are subject to change without notice.

The asset class is still in the early stages of what is likely to be a multi-year recovery.

Rate hikes are likely to be tempered and expected, and are more indicative of a strong economy that supports rent increases rather than a drag on real estate.

Key headwinds for core sectors like industrial and apartments, including record levels of supply are abating.

For example, the office sector, which has been plagued by the impacts of work-from-home and, earlier this year, fears of AI-driven white collar job displacement has begun to show positive momentum.

Return-to-office trends and dimming concerns of AI’s impact on employment have led to strong rental rate growth in markets like New York, San Francisco and select Sun Belt cities.

Data center leasing remains incredibly strong, even as headlines are increasingly focused on the number of local governments enacting moratoriums.

The reality is that hyperscaler capital spending continues to accelerate.

And the moratoriums, driven by public opposition over power and water, are likely to constrain future supply growth, benefiting incumbent operators in the form of lower supply leading to higher rents for existing centers in the face of such high demand.

Senior housing fundamentals were also strong in the quarter, as the demographic tailwind of seniors is being reinforced by limited new supply, which is not expected to meaningfully increase for the next several years.

Another key consideration is how investor enthusiasm for AI has overshadowed value and income-orientated sectors such as real estate.

While data centers have provided and will continue to offer exposure to AI-related growth, part of this year’s story has been the broadening of growth across the economy.

Corporate earnings have once again surprised in 2026 but as growth moderates into ’27, REIT earnings growth is expected to maintain much of its momentum.

Cash flow growth (FAD)

As of June 30, 2026. Source: FactSet.

There is no guarantee that any historical trend illustrated above will be repeated in the future, and there is no way to predict precisely when such a trend will begin. The views and opinions above are as of the date of this publication and are subject to change without notice.

In fact, property cash flow growth continues to accelerate.

As a result, the spread in earnings growth between the S&P 500 and REITs is expected to narrow, which could attract additional capital to the sector and support higher valuations.

September 2006-August 2026

At the same time, the valuation gap between REITs and the S&P remains several turns below the historical average, suggesting that REITs continue to trade at attractive relative multiples.

As of August 31, 2026. Source: UBS, Bloomberg, Cohen & Steers.

There is no guarantee that any historical trend illustrated above will be repeated in the future, and there is no way to predict precisely when such a trend will begin. The views and opinions above are as of the date of this publication and are subject to change without notice.

REITs also offer diversification benefits.

As of June 30, 2026. Source: Robert Shille Yale University, Morningstar, FactSet.

Today, market-cap weighted equities are highly valued, which translates to lower expected returns.

They are high concentrated in similar technology names.

And equities have become increasingly correlated with bonds, reducing the diversification of traditional 60/40 stock bond portfolios.

We believe the real estate recovery cycle we are seeing now will be a long-lived cycle, fundamentals are strong, supply and demand continues to favor many real estate property types, and allocation alternatives, especially equities, are less attractive today.