US REITs Lead Global 10-Year Returns as Data Centers Surge 36%

US real estate investment trusts have delivered the best 10-year returns of any global market, led by data-center funds that have surged 36 percent in 2026.

US real estate investment trusts have delivered the best 10-year returns of any global market, with data-center-focused funds leading gains as the FTSE Nareit All Equity index climbed about 20 percent in 2026.

"The convergence has closed by about half, and there is still room to run," said John Worth, executive vice president for research and investor outreach at Nareit.

Data centers have risen nearly 36 percent this year, a rebound from a 14 percent decline in 2025, while lodging REITs are up 50 percent, healthcare 29.5 percent, self-storage 26.4 percent and office 17.4 percent, Nareit data show. The MSCI U.S. REIT index has gained 18.61 percent over the past 12 months, trading in a 52-week range of 1,252.54 to 1,572.65.

The runup narrows a valuation gap that opened in 2025, when the ratio of the S&P 500's price-to-earnings multiple to equity REIT price-to-FFO widened to 1.3 from a historical average of 1. Rates remain the swing factor: the market expects Federal Reserve rate hikes in the second half of 2026, with cuts forecast for 2027 and 2028 on slowing growth.

Data Centers Lead a Sector Shift

New and emerging property sectors now account for 56 percent of the FTSE Nareit All Equity index, up from a market dominated by office, retail, residential and industrial. Data centers have fit well in public markets because of their scale and management efficiencies, and Blackstone listed a data center REIT this year. Equinix, which Morningstar analyst Martin Szumski calls the largest third-party data center operator by revenue, is among the best-performing REITs of 2026, while Prologis has benefited from data center development.

Rates and the Forward Path

The close connection between REIT performance and interest rates was evident in 2022, when higher bond yields weighed on the asset class as income investors found better options and borrowing costs slowed mergers and acquisitions. In early 2026, falling 10-year Treasury yields contributed to significant February outperformance before rising yields made life more difficult in subsequent months. Inflation running above the Fed's 2 percent target, partly because of higher energy costs from the Iran war, complicates the outlook.

Despite the runup, 18 of 26 REITs under Morningstar coverage traded below estimates of intrinsic value at the end of July, including some yielding north of 5 percent. Welltower, the largest US REIT, and Simon Property Group are considered richly valued after gains of more than 30 percent and record rent growth, respectively.

The outperformance reflects a structural shift in how investors access real estate. With private core funds still 89 percent concentrated in traditional property types, REITs offer exposure to data centers, single-family rentals and manufactured housing that are harder to reach on the private side. If the Fed delivers the rate cuts forecast for 2027 and 2028, REITs could extend their run; if inflation forces further hikes, the sector's yield advantage over bonds will narrow again.

This article is for informational purposes only and does not constitute investment advice.