2025 REIT sector trends: What real estate investment firms can learn from REIT performance

As the first quarter of 2025 comes to a close, the Real Estate Investment Trusts (REITs) market is providing early indicators of broader trends in real estate investment. 

With more than 200 U.S. REITs and homebuilders reporting, the insights drawn from their performance are invaluable not only to public market analysts but also to private market professionals, including general partners (GPs), fund managers, and capital raisers. 

These savvy commercial real estate investors often look at REITs’ performance to gain a better understanding of the real estate investment sector before making strategic decisions about their own investments. 

Early signals and REIT indicators from a shifting market

The following examples illustrate how REITs can impact investors’ decisions.

• Taking the market’s temperature: REITs function as a real-time barometer of the market. Since REITs are publicly traded securities, they reflect the sentiments of investors and the market for various property sectors.
  If multifamily REITs are performing well and office REITs are doing poorly, that signals which property segment might be a better investment at present.

• Getting ahead of price changes: When REIT prices decrease significantly, property values invariably follow suit with a lag of 6-18 months. Investors can use this time gap to sell before their property values fall or prepare to buy when market prices drop.

• Expert commentary and forward guidance: During earnings calls, REIT fund managers offer valuable insight into market conditions and what they see happening in the future. This perspective enables investors to identify opportunities and address issues before they arise.

These early earnings results and REIT indicators act as directional signals, helping guide strategic decisions within a more measured real estate climate.

Earnings recap: A steady start with sector-level signals

Of the 103 equity REITs that shared full-year FFO guidance, 28% raised their outlook, 63% kept it the same, and just 9% lowered it. These results were right in line with what Hoya Capital expected going into earnings season and point to a steady, if not particularly strong, start to the year. Overall, the mood remains cautiously optimistic, especially with REITs keeping pace with the S&P 500’s 6% gain since mid-April. Most of the guidance changes had more to do with specific sectors than with the overall market as a whole. Upward revisions trumped downward ones by more than three to one. The performance of public REITs continues to serve as a helpful barometer for private market stakeholders.

Sector trends to watch in 2025

Technology and Digital Infrastructure
Technology REITs, especially Data Centers and Cell Towers, stood out this quarter. All three major Data Center REITs and two of the three Cell Tower REITs raised their full-year guidance, pointing to continued demand tied to AI and digital infrastructure.

Residential
Residential REITs posted strong results. Single-family rentals and apartment REITs saw rent growth after two slower years. Companies like Mid-America Apartment Communities (MAA) and Camden Property Trust exceeded expectations with high occupancy and positive sentiment scores.

Retail
Retail REITs continued to hold steady, particularly those focused on grocery-anchored and essential retail. Brixmor Property Group and Federal Realty both raised guidance, backed by solid leasing and healthy rent spreads in open-air and mixed-use formats.

Office
Office REITs remain uneven and continue to struggle from the COVID-19 work-from-home mandate. While Class A properties in top-tier markets see some positive absorption, overall vacancy and weak leasing remain challenges across the sector.

Industrial
Industrial REITs, including Prologis and EastGroup Properties, continue to benefit from the growth of logistics and e-commerce. They reported strong occupancy and rent growth, with Prologis highlighting a 53.7% increase in net effective rent.

Hotel
Hotel REITs showed mixed results. Leisure-focused REITs like Pebblebrook outperformed, while others trimmed guidance amid inconsistent group bookings and economic uncertainty.

What this means for fund managers and GPs

The Q1 2025 REIT earnings season gives private real estate investors a clear sense of where the market is headed:
• Multifamily: Class B assets are looking more attractive as affordability becomes more of a priority.
• Retail: Grocery-anchored and neighborhood centers remain a reliable bet for private investors.
• Industrial: With demand for logistics space steady, industrial continues to anchor many portfolios.
• Office: Still high-risk—Class A properties with strong amenities are the safer play.

These takeaways can help shape capital raising conversations and support more informed underwriting decisions.

Sector implications for LP communication and strategy

Limited Partners in this more selective environment should focus on the sectors showing reliable momentum. LPs need to know whether their capital is being invested in places with a proven track record or a clear growth path. Public REITs give managers a way to:
• Point to recent, real-world performance as evidence for their choices.
• Connect their strategy to broader trends, such as AI infrastructure or ongoing rental demand.
• Explain why they’re steering clear of weaker sectors like Office or Cold Storage.

Overall, the steadiness in REIT results supports a strategy that’s thoughtful but still forward-leaning—something LPs tend to appreciate.

Clarity and readiness as strategic advantages

Q1 2025 REIT performance offers more than just a snapshot of the public markets; it delivers early clarity that private market real estate investors can use to make sharper, data-informed decisions.

With key sectors such as residential, industrial, and retail showing resilience, investment firms can tap into industries where performance is already signaling upward momentum, thus mitigating risk in their portfolios. 

As public REITs continue to signal future valuation shifts and sector stability, fund and investment managers who act on these insights will be better positioned to move confidently in a market that favors careful, well-timed moves.