The State Of REITs: March 2025 Edition

2025-03-21 11:41:20 ET

Summary

• REITs bounced back (+1.77%) in February and now have a positive year-to-date total return (+0.79%) after the first two months of the year.
• Large cap (+4.58%), small cap (+2.00%) and mid cap REITs (+0.98%) performed well in February while micro caps (-1.55%) continued to badly underperform their larger peers.
• 64.97% of REIT securities had a positive total in February.
• 61% of REIT property types averaged positive total returns in February. Data Centers (-4.45%) and Hotels (-3.44%) struggled while Land (+7.19%) and Multifamily (+7.16%) outpaced all other property types.
• The average REIT NAV discount narrowed from -13.29%to -11.22% during February. The median NAV discount also narrowed from -14.20%to -13.47%.

REIT Performance

After a weak start to the year in January (-1.29%), real estate investment trusts, or REITs, moved back into the black with a solid +1.77% total return in February. REITs handily outpaced the broader market as the NASDAQ (-3.9%), Dow Jones Industrial Average (-1.4%) and S&P 500 (-1.3%) all fell into the red in February. The market cap weighted Vanguard Real Estate ETF ( VNQ ) outperformed the average REIT in February (+3.70% vs. +1.77%) and has significantly outperformed year-to-date (+5.41% vs. +0.79%). The spread between the 2025 FFO multiples of large cap REITs (18.3x) and small cap REITs (13.3x) widened again in February as multiples expanded 1.0 turn for large caps and 0.7 turns for small caps. Investors currently need to pay an average of 37.6% more for each dollar of FFO from large cap REITs relative to small cap REITs. In this monthly publication, I will provide REIT data on numerous metrics to help readers identify which property types and individual securities currently offer the best opportunities to achieve their investment goals.

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