Listed REITs returned nearly 17% in the third quarter, handily outperforming equities, as lower real rates took hold in markets.
KEY TAKEAWAYS
- Listed REITs generated total returns of nearly 17% in the third quarter of 2024, as lower rates have been a welcome relief given how much pressure the sector has been under since 2022.
- All eighteen REIT sectors were positive in the third quarter, but there was significant dispersion, with office, self-storage and cell towers leading due to their rate sensitivity.
- Listed REITs outperformed the cap-weighted S&P 500 and the NASDAQ index substantially, while we see potential for continued relative outperformance as growth slows and interest rates continue declining.
Historically strong listed REIT returns, sector dispersion and REIT performance versus the broader equity market.
This month we are digging into the performance of listed REITs in the third quarter of 2024.
1. Listed REIT returns in Q3
First, listed REITs generated total returns of nearly 17% in the third quarter of 2024.
It was the eighth best quarter since 1990 (Exhibit 1) and the second best third quarter, trailing only the third quarter of 2009. Every month in the quarter was positive with July at 7.2%, August at 5.6% and September at 3.2%.
EXHIBIT 1
Q3 ‘24 was 8th best performing quarter on record

At September 30, 2024. Source Bloomberg
The positive performance of the sector in August and September is notable as these are historically among the weakest months of the year.
August has average returns of approximately 0.2% since 1995. September’s average is approximately -0.5%.
Year-over-year returns are nearly 35%, while listed REITs are up 43% since their trough in late October of 2023.
A 52-bps quarter-over-quarter decline in real rates was the catalyst for the rally, as signs of cooling inflation solidified the September interest rate cuts by the Federal Reserve. The market is pricing in three cuts totaling 75 bps for the remainder of this year and five cuts in 2025 totaling around 125 bps.
Real rates now stand at just under 1.6%, which is their lowest level in more than a year.
Listed REITs are more than a play on interest rates over the medium to long term, but lower rates have been a welcome relief valve over the near term given how much pressure the sector has been under since 2022.
2. Sector return dispersion
Second, I’m watching the dispersion of returns where all 18 REIT sectors were positive in the third quarter.
Office at 29.5%, specialty at 27%, self-storage at almost 23% and cell towers at above 21% led. Single family rental at almost 1%, lodging at 1.5%, and mortgages at 8% were relative laggards (Exhibit 2).
EXHIBIT 2
Rate cut leads to outperformance for office, self-storage and cell towers

At September 30, 2024. Source Bloomberg
The reason for the rally across sectors is driven, in large part, by the decline in interest rates.
For example, the outperformance of office makes fundamental sense as it’s one of the most levered REIT sectors and therefore has an outsized benefit from lower interest rates.
Self-storage is highly correlated to a rebound in the housing market as mortgage rates decline. This is because people store their things when they move. Furthermore, self-storage is typically to be viewed as a more recession resistant asset class.
And cell towers are rate sensitive given that they have long-term leases with contractual growth. The sector experienced a rotation as rates declined as cell towers have been an underperformer in recent years, ranking 15th out of 18 subsectors in 2022, 16th in 2023 and 12th in 2024 YTD.
3. REIT performance vs. equities
Finally, we think it’s important to put the performance of listed REITs in perspective relative to the broader equity markets.
Listed REITs outperformed the cap-weighted S&P 500 by almost 11 percentage points in the third quarter and the NASDAQ by more than 14 percentage points (Exhibit 3).
EXHIBIT 3
Listed REITs substantially outperformed equities in Q3

At September 30, 2024. Source Bloomberg
In fact, real estate was the second-best sector of the S&P in the third quarter, trailing only utilities, but easily besting industrials by more than 5.6 percentage points.
While listed REITs are still trailing the cap weighted S&P year-to-date by almost eight percentage points and the NASDAQ by more than 7.5 percentage points, the sector has significantly closed the gap to equities since their year-to-date lows in mid April.
Real estate is now the 8th best sector of the S&P whereas it was the worst sector earlier this year and, at one point, the only sector of the S&P that was negative on the year.
As we look forward, we think there are some similarities to the backdrop that played out in the early 2000s when listed REITs performed well.
Recall that listed REITs had some of their worst years in 1998 and 1999 given a combination of rising interest rates driven by the Russian debt crisis, demand for dot.com stocks and deregulation of the defensive telecom sector.
But fortunes reversed in the early 2000s as the sector had some of its best absolute and relative years from 2000 to 2004 just as the broader equity markets were pulling back.
Fast forward to today. Listed REITs were out of favor since the beginning of 2022 given a combination of rising interest rates, demand for tech stocks and an AI boom that has benefited defensive utility stocks.
We see potential for continued relative outperformance in an environment where growth slows and interest rates continue declining.
Watch September 2024 The Real Estate Reel: Where are we in the private real estate cycle?
Watch all The Real Estate Reel videos.
FURTHER READING

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The Real Estate Reel: Drivers of commercial real estate returns in 2025
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