REIT Returns Rise Despite Recent Interest Rate Increases

Published on 10/8/2026 · Source: cnbc.com

AI Summary

Summarized by AI from the source below

Real Estate Investment Trusts (REITs) have shown resilience despite rising interest rates. Recent analysis shows that as of 2023, REIT returns are up over 6% according to the FTSE NAREIT All REIT Index, which goes against the traditional view of an inverse relationship between interest rates and REIT performance. Experts like Seth Laughlin from Cohen & Steers and David Auerbach from Hoya Capital Real Estate attribute this to strong real estate fundamentals outpacing the challenges posed by increased rates. Key factors include improved earnings growth, attractive property valuations, and healthy cash flow growth. Specifically, earnings growth is expected to be 8% next year, and 58 of 98 REITs have raised their full-year guidance.

The increase in earnings and stable cash flow are supported by reduced new supply, excluding data centers, and attractive valuations compared to other asset classes. The correlation between REIT performance and interest rates is currently at its lowest in four years. This market shift is attributed to the strengthening of real estate fundamentals, despite the general impact of higher borrowing costs from 2022 to 2024.

This change in REIT performance is relevant for investors, as it illustrates the potential of real estate assets to deliver stable returns even in a rising rate environment. Improved fundamentals and strong returns make REITs an attractive investment option in 2023.

Informational only, not financial advice. Content is AI-generated and may contain errors. How this works.

Our take

Opinion from the Newsstocks AI desk, not investment advice

In our view, the REIT market is showing resilience in the face of rising interest rates, driven by strong fundamentals such as earnings growth and healthy cash flows. If these factors continue to improve, REITs may remain attractive to investors seeking stable returns.

Key numbers

Year-to-date REIT returns: over 6%
Expected earnings growth: 8% next year
10-year Treasury yield increase: 100 basis points

What could help

Improved earnings growth supports REIT performance.

What could hurt

Higher interest rates have raised borrowing costs.

What to watch next

Watch for the continued impact of healthy property-level cash flows and earnings visibility on REIT performance.

The background

REITs often face pressure when interest rates rise as higher rates can lead to increased borrowing costs. However, improved real estate fundamentals can offset these challenges.

Questions readers ask

Why are REITs performing well despite rising rates?

Analysts attribute the performance to strong real estate fundamentals, improved earnings, and healthy cash flows that offset the impact of higher rates.