The State of REITs: February 2026 Edition

REIT Performance

REITs kicked off 2025 with a solid +1.09% average total return in January. The REIT sector’s January performance was largely in line with the broader market. REITs outperformed the NASDAQ (+1.0%), but fell short of the S&P 500 (+1.4%) and Dow Jones Industrial Average (+1.8%). The market-cap-weighted Vanguard Real Estate ETF (VNQ) outpaced the average REIT in January (+2.61% vs. +1.09%). The spread between the 2026 FFO multiples of large cap REITs (16.4x) and small cap REITs (12.8x) widened in January as multiples expanded 0.5 turns for large caps and only 0.1 turns for small caps. Investors currently need to pay an average of 28.1% 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.

Micro cap REITs (-8.88%) had a very rough start to the year, whereas their larger peers averaged gains in January. Small caps (+3.27%) led, followed by slightly lower average gains for mid caps (+2.65%) and large caps (+2.35%).

12 out of 18 Property Types Averaged Positive Returns in January

Two-thirds of REIT property types averaged a positive total return in January, with a wide 23.59% total return spread between the best and worst performing property types. Land (+15.36%) and Data Centers (+8.49%) were the best performing property types in the REIT sector in January. Single Family Housing (-8.24%) and Office (-7.24%) had the poorest start to the year.

The REIT sector as a whole saw the average P/FFO (2026Y) increase from 13.4x to 13.6x during January. 72.2% of property types averaged multiple expansion, 22.2% averaged multiple contraction and 5.6% saw multiples hold steady. Land (24.8x), Data Centers (23.8x), Manufactured Housing (17.8x) and Timber (17.5x) currently trade at the highest average multiples among REIT property types. Office (7.8x) and Hotels (8.6x) are the only property types that average single-digit FFO multiples.

Performance of Individual Securities

City Office REIT (CIO) was taken private and delisted on January 9th after being acquired by MCME Carell at a price of $7.00/share. MCME Carell is a joint venture of Morning Calm Management and Elliot Investment Management.

Plymouth Industrial REIT (PLYM) was acquired and taken private by Makarora Management and Ares Management at a price of $22.00/share. PLYM’s final date of trading was January 27th.

Gladstone Land (LAND) (+22.45%) and Farmland Partners (FPI) (+20.56%) led the REIT sector in January as investors piled into the only two publicly traded farmland REITs.

Office Properties Income Trust (OPITQ) (-96.09%) continues to see the share price approach zero after a chapter 11 bankruptcy filing. OPITQ continues to operate as it works to restructure debt and eventually emerge from bankruptcy with a leaner balance sheet and reduced debt service obligations.

63.46% of REITs had a positive total return in January. REITs averaged +1.09% total return in the first month of the year, which is 238 basis points better than the -1.29% return for the REIT sector in January 2025.

Dividend Yield

Dividend yield is an important component of a REIT’s total return. The particularly high dividend yields of the REIT sector are, for many investors, the primary reason for investment in this sector. As many REITs are currently trading at share prices well below their NAVs, yields are currently quite high for many REITs in the sector. Although a particularly high yield for a REIT may sometimes reflect a disproportionately high risk, there exist opportunities in some cases to capitalize on dividend yields that are sufficiently attractive to justify the underlying risks of the investment. I have included below a table ranking equity REITs from highest dividend yield (as of 1/31/2026) to lowest dividend yield.

Dividend News

3 REITs raised their dividend in January, one of which is a monthly dividend, and 2 of which are quarterly dividends. The largest increase was from STAG Industrial (STAG) with a 4% hike, followed by raises of 2.6% and 1% from Modiv Industrial (MDV) and Postal Realty Trust (PSTL), respectively.

Economic Health

After reaching a 15-year high in 2025, corporate bankruptcies decreased in January both on a month-over-month and year-over-year basis. The number of bankruptcies declined 15.7% from January 2025 and was 21.3% lower than in December. However, even the lower January figure still reflects an environment of elevated bankruptcy filings.

Valuation

REIT Premium/Discount to NAV by Property Type

Below is a downloadable data table, which ranks REITs within each property type from the largest discount to the largest premium to NAV. The consensus NAV used for this table is the average of analyst NAV estimates for each REIT. Both the NAV and the share price will change over time, so I will continue to include this table in upcoming issues of The State of REITs with updated consensus NAV estimates for each REIT for which such an estimate is available.

Takeaway

The large cap REIT premium (relative to small cap REITs) widened in January and investors are now paying on average about 28% more for each dollar of 2026 FFO/share to buy large cap REITs than small cap REITs (16.4x/12.8x – 1 = 28.1%). As can be seen in the table below, there is presently a strong positive correlation between market cap and FFO multiple.

The table below shows the average NAV premium/discount of REITs of each market cap bucket. This data, much like the data for price/FFO, shows a strong, positive correlation between market cap and Price/NAV. The average large cap (-5.81%) and mid cap REITs (-9.07%) trade at single-digit discounts to consensus NAV. Small cap REITs (-26.79%) trade around 3/4 of NAV while micro caps (-34.42%) trade for a little less than 2/3 of their respective NAVs.

REITs Engaged in Substantial Transaction Activity in 2025 and the Performance of New REITs Greatly Varied

Numerous REITs went on a buying spree in 2025, with REITs buying a total of 1,956 properties (excluding those acquired through M&A) for a whopping $32.47B. Millrose Properties (MRP) bought the most properties (860) followed by Welltower (WELL) (611) and Bluerock Homes Trust (BHM) (274). The REITs that spent the most on property acquisitions were Welltower ($9.806B), W.P. Carey (WPC) ($1.587B) and Terreno Realty (TRNO) ($1.106B).

2025 saw a 27.5% decline in the number of property dispositions by REITs. Only 713 properties were sold in 2025. However, the value of properties sold actually increased 66.4% year over year as REITs sold off $24.38 billion of real estate.

The REITs that sold the most properties in 2025 were Sun Communities (SUI) (144 properties), W. P. Carey (58 properties) and Diversifed Healthcare Trust (DHC) (30 properties). When measured in dollars, however, the REITs with the most property dispositions were Sun Communities ($5.526B), Aimco (AIV) ($2.0B) and Elme Communities (ELME) ($1.606B).

There were 3 new publicly traded REITs in 2025, which was only half as many as the year before. It was also only half as many as the number of REITs that no longer trade publicly after being acquired during 2025. The number of publicly traded REITs has steadily declined over the past 5 years, from 182 REITs in January 2021 down to only 155 at the end of January 2026.

There has been a huge disparity in performance of the new 2025 REITs since listing, with an enormous 9780 basis point spread in total return. Millrose Properties (MRP) (+41.7%) has significantly outperformed both REITs and the broader market. Fermi (FRMI) (-56.1%), however, has been a trainwreck and has already collapsed to less than half the IPO price in less than 4 months.

This massive difference in performance highlights the importance of proper due diligence in investing. Simply buying a REIT index means indiscriminately buying both the MRPs of the market and the FRMIs. Building a portfolio of carefully vetted REIT securities allows for capitalizing on unwarranted NAV discounts and targeted investment into REITs with high quality management teams. Even more importantly, it can help to reduce the risk of investment into REITs with a high likelihood of severe underperformance. In a sector as diverse as REITs, active portfolio management has the potential to achieve substantial alpha.

Important Notes and Disclosure

All articles are published and provided as an information source for investors capable of making their own investment decisions. None of the information offered should be construed to be advice or a recommendation that any particular security, portfolio of securities, transaction, or investment strategy is suitable for any specific person. The information offered is impersonal and not tailored to the investment needs of any specific person.

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Past performance does not guarantee future results. Investing in publicly held securities is speculative and involves risk, including the possible loss of principal. Historical returns should not be used as the primary basis for investment decisions. Although the statements of fact and data in this report have been obtained from sources believed to be reliable, 2MCAC does not guarantee their accuracy and assumes no liability or responsibility for any omissions/errors

Commentary may contain forward-looking statements that are by definition uncertain. Actual results may differ materially from our forecasts or estimations, and 2MCAC and its affiliates cannot be held liable for the use of and reliance upon the opinions, estimates, forecasts, and findings in this article.

Through October 2021, The State of REITs was published exclusively on Seeking Alpha by Simon Bowler, Sector Analyst at 2nd Market Capital Services Corporation (2MCSC).  Editions subsequent to October 2021 will be published on this website in addition to other platforms that may include Seeking Alpha.  2MCSC was formed in 1989 and provides investment research and consulting services to 2nd Market Capital Advisory Corporation. 2MCSC does not provide investment advice.  2MCSC is a separate entity but related under common ownership to 2nd Market Capital Advisory (2MCAC), a Wisconsin registered investment advisor.  Simon Bowler is an investment advisor representative of 2MCAC.  Any positive comments made by others should not be construed as an endorsement of the author's abilities to act as an investment advisor.

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