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Property Powerhouse REITs are Blowing Past the S&P 500

Author

Noah Zelvis
May 18, 2025

Property Powerhouse REITs are Blowing Past the S&P 500

As tariffs and general economic volatility rocked equity markets globally over the past few months, one sector in particular has outperformed most: real estate investment trusts, or REITs. 

The FTSE Nareit All Real Estate 50 Index, comprised of 50 domestic REITs, returned 2.43% this year alongside a healthy 4.05% dividend yield. And, even as elevated mortgage rates continued putting downward pressure on homebuyers and commercial real estate purchases alike, mortgage REITs benefited greatly. The FTESE Nareit Mortgage REIT Index returned 4.5% since January while generating a whopping 12.59% dividend yield. 

Compared to the S&P 500’s meager 1.53% increase since the year began (and slim 1.28% dividend yield), it’s clear that REITs are a sleeping giant generating significant returns for observant investors.

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But That Isn’t All!

Those REIT indices are all domestic - international REITs are doing even better, much as we’ve seen European and Asian-Pacific stock sectors outperforming American stocks. Their relative outperformance is due, in part, to interest rate cuts abroad alongside “smart money” cycling out of U.S. stocks and into global counterparts. 

Some quick international REIT stats include (per Nareit, again):

  • Global REIT returns hit 3.85% year-to-date, yielding slightly better than American counterparts at 4.08%.

  • European REITs blew away the competition at a whopping 13.67% return since January alongside a 4.10% dividend yield. 

  • Asia-Pacific sectors lagged Europe slightly, but still topped American real estate at 8.18% returns. Yield lagged somewhat, however, at 4.01% (still not too shabby!). 

REITs have the additional benefit of acting as a moderate inflation hedge. As they’re centered almost solely in “real property” sectors (mortgage REITs aside), companies holding the real estate within a REIT can better preserve asset value over time with fewer day-to-day fluctuations than other companies. 

This is also a function of mark-to-market accounting, which is a bit beyond our scope today, but it ultimately means that REITs have less stock price volatility. REITs’ collective beta is a hair below the market’s, at 0.95, but that is also skewed by more sensitive REIT sectors like lodging/resorts and retail.

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The Main Takeaway

Bottom line: REITs are outperforming, a trend that isn’t showing any sign of stopping. Moreover, REITs are a strong diversification tool and hedge against inflation, especially internationally as rates fall in countries like Japan. 

REIT sectors also range widely and include exceptionally stable sectors like healthcare and multi-family residential, so you can plug-and-play different picks to create a well-rounded REIT addition to your portfolio.

❌ Don’t leverage REITs as a yield-max play (unless pure income is your goal, in which case, better options are likely available). 

✅  Instead, target REITs with strong balance sheets and either recession-proof (as much as possible) tenancies OR real estate types with strong growth prospects.

✅ Take regional macro condition updates into account, too - interest rates and general economic strength impact REITs as much as (or more) standard corporate stock picks. 

Vanguard Global ex-U.S. Real Estate ETF (NASDAQ: VNQI) 

Expense ratio: 0.12%, or $12 on a $10,000 investment. 

VNQI is a no-brainer if you want to capture international REIT momentum. Returning 9.81% since January and offering a 4.02% yield, VNQI gives domestic investors access to a range of top global REITs that are otherwise mostly inaccessible with a rock-bottom expense ratio.

The top REIT ETF comprises 677 stocks with a median market cap just shy of $6B. It also has a healthy ~25/75 split between emerging and developed market REITs, combining growth prospects and stability in a solid package.  

Prologis (NYSE: PLD)

If you’d prefer to keep it (somewhat) domestic, it’s hard to beat Prologis’ 6% year-to-date return and 3.65% yield that handily beats both overall market returns and REIT-specific outperformance. Prologis is the world’s largest industrial real estate trust and operates logistics facilities in 19 countries. 

Welltower (NYSE: WELL)

WELL is a western-focused REIT operating in the U.S., Canada, and the U.K. Better yet, it's a top REIT in one of the most recession-proof sectors: healthcare. Welltower owns properties in healthcare segments like senior housing, skilled nursing facilities, and post-acute care. The high-flying domestic REIT returned nearly 20% since January, though its 1.80% yield leaves a bit to be desired.  

That’s it for today’s edition—thanks for reading! Reply to this email with any feedback or let me know which macro trends or markets you’d like me to cover next.

Best Regards,
—Noah Zelvis
Macro Notes

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