REITs, Rates, and the Road Ahead: Why Now May Be the Smartest Time to Invest

REITs, Rates, and the Road Ahead: Why Now May Be the Smartest Time to Invest

 

Welcome to the Future of Commercial Real Estate

In the ever-evolving world of commercial real estate, staying ahead of the curve requires more than just intuition—it demands insights, data, and expert perspectives. That’s exactly what Michael Bull delivered on a recent episode of America’s Commercial Real Estate Show, featuring a timely discussion on the performance and outlook for REITs (Real Estate Investment Trusts).

Joining Michael was Ed Pierzak, Senior Vice President of Research at Nareit, who offered a deep dive into the trends, challenges, and opportunities shaping REIT performance as we head into the final quarter of 2025.

 

Upcoming Industry Event: C5 + CCIM Global Summit in Chicago

Before diving into the meat of the conversation, Michael kicked off the show with a reminder about the upcoming C5 + CCIM Global Summit, happening September 16–18 in Chicago. It’s an annual global gathering of the industry's top professionals, and Michael will be speaking on two panels—one focused on the U.S. office market and another on current opportunities in the commercial real estate cycle.

Learn more at: c5summit.realestate

 

How Are REITs Performing in Late 2025?

Ed Pierzak addressed the big question: How are REITs faring as we enter Q4 of 2025?

At the start of the year, expectations were high. Many believed that REITs would see a strong rebound as valuation gaps between the public and private markets began to narrow. However, volatility in interest rates and trade policy introduced unexpected turbulence.

That said, optimism remains strong. Nareit’s latest REIT Industry Tracker shows:

• Solid Operational Performance: Same-store Net Operating Income (NOI) is keeping pace with inflation.
• Strong Balance Sheets: REITs are holding low leverage, long-term fixed-rate, unsecured debt—offering financial flexibility in uncertain markets.
• Positioned to Acquire: As transaction volumes begin to rebound, REITs are well-equipped to act quickly and strategically.

 

Where the Smart Money Is Going: Active Manager Tracker

One of Nareit’s most compelling tools, the Active Manager Tracker, follows around 20 of the largest dedicated REIT investors to see where they're placing their capital. The Q2 2025 report revealed some key shifts:

• Telecom (Cell Towers) led the pack in allocation and overweight positions.
• Residential, Healthcare, and Data Centers remain strong.
• Office Sector is making a comeback: After being significantly underweight, active REIT managers now hold office REITs at 100% of index weight—a strong signal of growing confidence.

Michael Bull noted this aligns with his own long-standing view: that the office market recovery will come sooner and stronger than many expect. Factors like reduced new supply, conversions, and demolitions are helping rebalance supply and demand, especially in growing metro areas.

 

The REITs and Interest Rate Dynamic

Interest rates have been a persistent concern in 2025. But how do REITs actually perform in rising or falling rate environments?

Ed shared findings from extensive Nareit research:

• Over the past three decades, REITs posted positive returns in low, mid, and high-rate environments.
• In both rising and falling interest rate cycles, REITs delivered positive returns more than 75% of the time.
• The only notable weakness for REITs occurred during periods of falling rates combined with very weak GDP growth (<1%)—a scenario we are not currently facing.

There’s also the question of REITs’ inverse relationship with the 10-year Treasury yield. Historically, this relationship has been mixed—half the time it’s negative, and half the time it’s positive—often driven by investor sentiment rather than economic fundamentals alone.

 

Supply, Demand & REIT Valuations

New supply in the commercial real estate market has dropped significantly after years of robust development driven by low interest rates. With new deliveries slowing and demand rebounding in key sectors, REITs stand to benefit.

• REITs have shown disciplined acquisition strategies, pulling back during uncertain periods and scaling up as the market improves.
• They’re not beholden to fundraising cycles like private real estate funds, giving them more agility.
• Today’s REIT portfolios are well-positioned for growth, particularly in sectors with constrained supply.

 

Strategic & Tactical Role of REITs

As we navigate the back half of 2025, REITs are increasingly seen as both a tactical play—due to discounted pricing and market inefficiencies—and a strategic component of any diversified real estate portfolio.

Ed emphasized that the valuation divergence between public and private real estate still exists. As this gap closes, REITs are poised for outperformance.

Moreover, REITs offer exposure beyond the traditional property sectors, reflecting the modern economy—from data centers and logistics to healthcare and telecom infrastructure.

 

Final Thoughts: Is Now the Time to Buy?

Michael closed the episode with a clear takeaway:

“If you’re a long-term investor, like most of us in commercial real estate, now is the time to look at REITs. Time to buy is when others are hesitant, and new supply is slowing.”

With pricing down, cap rates rising, and tenant demand stabilizing in many sectors, REITs offer a compelling opportunity for both institutional and individual investors.

 

Resources Mentioned:

• Nareit’s Research & Reports: reit.com
• C5 + CCIM Global Summit: c5summit.realestate
• America’s Commercial Real Estate Show: CREshow.com

 

Stay tuned each week for more insights on market cycles, investment strategies, and what’s next in commercial real estate. Until next time—lead, learn, and laugh.

 

Sponsored by:

• Bull Realty – Customized asset and occupancy solutions: bullrealty.com
• Commercial Agent Success Strategies – Training for commercial agents: commercialagentsuccess.com