Rates don’t drive REIT returns; fundamentals do

REIT returns are better explained by cash-flow growth, property supply and demand, and valuations than by interest-rate movements alone.

• Rolling one-year correlations between REIT returns and changes in 10-year Treasury yields have repeatedly shifted, so the level or direction of rates has not reliably predicted performance.
• The 2022–2024 slowdown reflected normalized post-pandemic rent growth, emerging new supply, and tighter financial conditions that curtailed external growth opportunities, not higher rates alone.
• By 2026, new supply had peaked and cash-flow growth was accelerating, while REIT valuations remained attractive relative to equities.
• Cohen & Steers assesses the market using weighted-average FAD growth and share-price-to-FAD-per-share multiples for FTSE Nareit All Equity REITs constituents; its cash-flow series excludes growth outliers beyond +/-100%.

Takeaway: Investors should assess REIT fundamentals and valuation rather than infer returns from rate moves alone, although the proposed long-term recovery cycle is not guaranteed and historical relationships may not persist.