Our team attended NAREIT’s REITweek conference, meeting with management teams from numerous REITs across multiple property sectors. Key insights from diverging apartment market fundamentals and trade policy impacts on industrial demand, to the emerging office sector recovery.
Key takeaways:
- Sunbelt apartment markets continue struggling with supply overhang while coastal markets demonstrate stronger fundamentals and pricing power.
- Trade policy uncertainty is creating hesitation among industrial tenants, leading to delayed leasing decisions and constrained demand in port-adjacent markets.
- The office sector recovery is gaining momentum, with premium properties leading the way and West Coast markets positioned for significant improvement.
Recently, over ninety REITs, representing more than twenty different property sectors, gathered here in New York for the NAREIT conference. Our team was in attendance meeting with management teams to learn how they are positioned for the remainder of 2025.
This month we are focused on apartment rental trends, industrial performance considering trade policy, and the recovery in the office market.
Welcome to the Real Estate Reel from Cohen and Steers.
1. Sunbelt has a larger occupancy gap to close than the rest of the country
First, we are looking at apartment demand across the country. While many REITs said that leasing trends were better-than-expected for coastal markets and in-line for the Sunbelt, we believe the supply overhang may take at least another year to work through, as developments continue to come online.
Looking at occupancy trends, at the market level, Sunbelt markets are roughly 3% below their long-term average. This is a meaningful divergence compared to Coastal markets.
EXHIBIT 1
Sunbelt has a larger occupancy gap to close than the rest of the country
Historical occupancy versus long-term average occupancy
As of May 30, 2025 Source: CoStar, Cohen & Steers. Data quoted represents past performance, which is no guarantee of future results.
If demand can remain consistent, we think it could take more than a year for occupancy to stabilize in the Sunbelt, and that assumes job growth does not slow further from here. Meanwhile, coastal markets have less supply, leading to better pricing power, especially on the West Coast.
2. Data Suggests Liberation Day Trade Effects Still Materializing
The second data point we are watching is how industrial REITs are responding to trade uncertainty. While most industrial REITs reported that conditions were “better-than-feared” following “Liberation Day”, tenants are taking longer to make leasing decisions, hoping for some clarity on trade policy before committing to new spaces. While consumption is the most important driver for industrial demand, trade volumes also matter for many coastal markets.
EXHIBIT 2
Port data suggests Liberation Day trade effects still materializing
2025 Port of Los Angeles total TEU(1) Volume and Year-over-Year change
As of May 30, 2025 Source: Port of Los Angeles, Cohen & Steers. Data quoted represents past performance, which is no guarantee of future results.
(1) The twenty-foot equivalent unit (abbreviated TEU) is a general unit of cargo capacity, often used for container ships and container ports.
Port of LA container volumes were down 5% in May, reversing the pulled forward demand in April when people tried to get goods in ahead of tariffs. Prolonged uncertainty is likely to constrain leasing, especially for REITs with high exposure to markets with port related activity.
3. Office market poised for recovery
Finally, we are focusing on the office sector. At NAREIT, most management teams struck a positive tone, noting that office leasing continued even in an uncertain macro backdrop. After delaying leasing decisions for many years following the pandemic, tenants are back in the market to find good spaces in order to bring their employees back in the office.
We note that the Class A and “trophy properties” owned by office REITs that have the capital to attract tenants and upgrade the spaces are experiencing fundamental improvement much faster than the sector at large. In particular, we believe the West Coast office market could be set for a recovery that mirrors the rebound that New York City office has experienced over the past 18 months.
Watch May 2025 The Real Estate Reel: REITs offer a potential haven amid tariff-induced uncertainty.
Watch all The Real Estate Reel videos.
ABOUT THE AUTHORS
Ji Zhang, CFA, Senior Vice President, is a portfolio manager for global real estate portfolios.
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REITs offer a potential haven amid tariff-induced uncertainty
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Data quoted represents past performance, which is no guarantee of future results. The information presented does not reflect the performance of any fund or account managed or serviced by Cohen & Steers, and there is no guarantee that investors will experience the type of performance reflected. There is no guarantee that any market forecast set forth in this video will be realized. There is no guarantee that any historical trend referenced herein will be repeated in the future, and there is no way to predict precisely when such a trend will begin. The mention of specific securities is not a recommendation or solicitation to buy, sell or hold any particular security and should not be relied upon as investment advice.
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