🏢 REITs after years of underperformance: one of the most interesting opportunities in the market?

Over the past few days I've dug a bit deeper into REITs, and the more I look at them, the more I like today's setup.

Not because "they've fallen a lot, so they must rise."

But because several interesting factors are coming together at once.

📉 First, a bit of context.

From 2022 to 2025, U.S. equity REITs cumulatively did approximately:

🏢 REITs: −10% 📈 S&P 500: +52%

A difference of more than 60 percentage points.

And individual years looked like this:

2022: REITs −25% vs. S&P −18% 2023: +11% vs. +26% 2024: +5% vs. +25% 2025: +2% vs. +18%

Four years of significant relative underperformance.

And 2026 so far looks different.

REITs are roughly +14% YTD, while the S&P 500 is around +14%.

So for the first time in a long while, relative performance is no longer clearly working against REITs.

🔄 And here's where history gets interesting.

We've seen similar extreme valuation gaps in the past.

After the GFC, REITs did approximately the following over the next four quarters:

🏢 REITs: +106.7% 📈 S&P 500: +49.8%

After the COVID valuation dislocation period:

🏢 REITs: +41.3% 📈 S&P 500: +28.7%

And research by Cohen & Steers at similarly extreme discounts in 2003, 2009, and 2020 showed that REITs subsequently outperformed the broad market by an average of about 29.8% over the next year.

Of course, history guarantees nothing.

But it shows that long-term relative underperformance + a significant valuation discount have historically been an interesting contrarian setup.

💰 And REITs have one quality that many investors underestimate: the dividend.

With an ordinary stock, you often wait mainly for price growth.

With REITs, returns can come from multiple drivers:

1️⃣ AFFO per share growth 2️⃣ high dividend 3️⃣ expansion of valuation multiples

And it's exactly this combination that interests me today.

If, for example, a company can grow AFFO/share by 4–6% annually, pays a 5–7% dividend, and over time its P/AFFO moves back toward its historical average, you don't need any crazy boom for the resulting total return to look very good.

🏗️ Another driver may come from the supply side.

Higher rates in recent years have made development significantly more expensive.

Less new construction today can mean:

➡️ less new supply ➡️ higher occupancy ➡️ greater pricing power ➡️ rent growth ➡️ higher NOI ➡️ FFO/AFFO growth

And this shows up with a lag.

For some real estate segments, this could be very interesting for 2026–2028.

📊 So with REITs, I don't primarily look at P/E.

More important for me are:

• FFO / AFFO per share • P/FFO and P/AFFO • dividend payout via AFFO • leverage • debt maturities • occupancy • same-store NOI • supply pipeline • ability to finance new acquisitions

And above all:

growth per share, not just growth of the whole company.

A REIT can issue new shares, grow at the level of total FFO, but if FFO/share stagnates, shareholders don't get much from that.

🔥 Three REITs I currently like most for further research:

VICI Properties $VICI

Very low valuation, high dividend yield, long-term contracts, and relatively predictable cash flow.

Mid-America Apartment Communities $MAA

An apartment REIT where the new construction cycle could be especially interesting. If supply in the Sunbelt really starts to decline significantly, MAA could get both NOI growth and a valuation rerating.

Realty Income $O

One of the best-known net-lease REITs. It's not the cheapest of all, but the combination of quality, diversification, dividend, and long-term growth still makes it a very interesting benchmark for the entire sector.

⚠️ REITs are of course not without risk.

If the 10Y Treasury moves significantly higher, refinancing worsens, or a recession comes with falling occupancy and rents, the whole rerating could be significantly delayed.

So I wouldn't buy "REITs" as one homogeneous sector.

I want to own quality companies with healthy balance sheets, growing AFFO/share, and a dividend they can cover.

But after four years of significant underperformance, this sector looks considerably more interesting to me today than a few years ago.

Maybe we're not yet at the start of a big comeback. But at the very least, I think it's worth watching REITs closely again.

Which REIT do you consider the most interesting today? 👇