The State of REITs: March 2026 Edition

Micro cap REITs (-6.12%) continue to severely underperform their larger peers, which all averaged gains in February. Large caps (+5.80%) saw the strongest average gains followed by mid caps (+5.26%) and small caps (+4.94%). During the first two months of 2026, small cap REITs have outperformed large caps by 8 basis points.

16 out of 18 Property Types Averaged Positive Returns in February

88.89% of REIT property types averaged a positive total return in February with a 21.91% total return spread between the best and worst performing property types. Data Centers (+14.56%) and Advertising (+12.91%) were the top performing property types in the REIT sector in February. Office (-7.35%) and Timber (-5.17%) were the only property types in the red.

The REIT sector as a whole saw the average P/FFO (2026Y) increase from 13.6x to 14.6x during February. 88.9% of property types averaged multiple expansion and 11.1% averaged multiple contraction. Land (31.1x), Data Centers (26.9x), Manufactured Housing (18.5x) and Shopping Centers (18.3x) currently trade at the highest average multiples among REIT property types. Office (7.3x) and Hotels (8.9x) are the only property types that average single digit FFO multiples.

Performance of Individual Securities

PotlatchDeltic (PCH) merged with Rayonier (RYN) in an all-stock deal, which provided PCH shareholders with 1.7339 shares of RYN for each PCH share held. The merger closed on January 30th and the combined company has traded under the RYN ticker since.

Sotherly Hotels (SOHO) was taken private and delisted on February 12th after being acquired by Kemmons Wilson Hospitality Partners and Ascendant Capital Partners at a price of $2.25/share. That price represents a 152.7% premium to the closing share price on the prior trading day.

Peakstone Realty Trust (PKST) (+33.55%) led the REIT sector in February as the stock price surged upon the February 2nd announcement that they accepted an acquisition offer from Brookfield Asset Management (BAM) at a purchase price of $21/share.

Wheeler REIT (WHLR) (-60.08%) continued its multi-year freefall as there continues to be no evidence of a turnaround that could facilitate a rebound in fundamentals.

71.71% of REITs had a positive total return in February. REITs have averaged a +5.52% year-to-date total return in 2026 far exceeding the +0.79% return for the REIT sector over the first two months of 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 NAV, yields are currently quite high for many REITs within 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 2/28/2026) to lowest dividend yield.

Dividend News

20 REITs hiked their dividend in February, one of which is a monthly dividend, and 19 of which are quarterly dividends. This brings the total number of REITs that have raised their dividends in 2026 up to 22. The largest dividend increase in February was from Farmland Partners (FPI) with a 50% hike, followed by raises of 12.6% and 12.4% from SBA Communications (SBAC) and First Industrial Realty Trust (FR), respectively.

Economic Health

The number of corporate bankruptcies increased in each of the past 3 years, reaching a 15-year high in 2025. However, 2026 has thus far seen a reversal of that trend as bankruptcies decreased in January and again in February. February marked a decrease of 5.2% month-over-month and a 6.8% decrease from February 2025. These modest improvements are a positive sign, but bankruptcy filings remain at an elevated level.

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 February, and investors are now paying on average about 29% more for each dollar of 2026 FFO/share to buy large cap REITs than small cap REITs (17.4x/13.5x – 1 = 28.9%). 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 (-1.16%) and mid cap REITs (-5.22%) trade at single-digit discounts to consensus NAV. Small cap REITs (-22.02%) trade for a little over 3/4 of NAV while micro caps (-36.36%) trade for a little less than 2/3 of their respective NAVs.

REITs are Ramping up Disciplined Capital-Raising Activity and Facing Rising Short Interest

REIT capital-raising activity reached a 5-month high in February as REITs seek to capitalize on improving real estate fundamentals. However, with the vast majority of REITs trading below NAV, nearly all capital raised thus far this year has been via debt rather than equity. Of the $7.11B raised, $6.34B was debt, with only $769.9M of common equity issuance.

The REIT sector as a whole showed capital-raising discipline in January and February, as there were no REITs diluting their NAV via common equity issuance at a price below NAV. The only REIT to issue common equity over the first two months of the year was American Healthcare REIT (AHR), which closed out the month at an 85.54% NAV premium. This massive premium makes any common share issuance immediately accretive to NAV. W.P. Carey (WPC) and Uniti Group (UNIT) had the largest debt offerings over the first two months of the year, with $1.19B and $1.0B, respectively. Gaming and Leisure Properties (GLPI), Equinix (EQIX), and Simon Property Group (SPG) have each raised $800B of debt this year as well.

REIT short interest rose 18 basis points in February up to 4.8% of shares outstanding. With a huge spike in short interest for single-tenant focused triple net REITs, Other Retail overtook Office as the most heavily shorted REIT property type. Data Centers remain the least shorted property type followed by Residential and Advertising.

The 4 REITs with the largest increase in short interest as a percentage of shares outstanding are all Triple Net REITs. Getty Realty (GTY) saw the sharpest spike in short interest with an increase of +7.3% during February. This was followed by significant increases in short interest for Agree Realty (ADC) (+6.6%), NETSTREIT (NTST) (+6.5%) and Essential Properties Realty Trust (ESRT) (+3.8%).

Medical Properties Trust (MPT) saw the biggest reduction in short interest (-2.7%) in February as the health care REIT posted a strong Q4 earnings beat and reported significant progress in addressing tenant issues. Power REIT (PW) and Hudson Pacific Properties Trust (HPP) also saw short interest declines of -2.3% and -2.0% respectively.

REITs typically have high short interest when the company is perceived to have material risk of significant underperformance. This elevated short interest can be based on risk pertaining to the balance sheet, tenant issues, perceived overvaluation, or a litany of other reasons. This can occur both with REITs whose share prices have already collapsed, such as Wheeler REIT (WHLR), or with REITs that have substantially outperformed, such as American Healthcare REIT (AHR). Since shares that have been sold short need to be bought back at some point, if a heavily shorted REIT eliminates or significantly reduces the material risk that the short thesis was based on, this can lead to magnified share price gains as both long investors and former short investors exiting their positions compete to buy shares. As there are currently 14 REITs with double-digit short interest and many more with short interest in the high single-digits, investors have opportunities for outsized gains if they can correctly identify which REITs will successfully address their respective risks, resulting in a collapse of the short thesis.

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.

We cannot determine whether the content of any article or recommendation is appropriate for any specific person. Readers should contact their financial professional to discuss the suitability of any of the strategies or holdings before implementation in their portfolio. Research and information are provided for informational purposes only and are not intended for trading purposes. NEVER make an investment decision based solely on the information provided in our articles.

We may hold, purchase, or sell positions in securities mentioned in our articles and will not disclose this information to subscribers, nor the time the positions in the securities were acquired. We may liquidate shares in profiled companies at any time without notice. We may also take positions inconsistent with the information and views expressed on our website.

We routinely own and trade the same securities purchased or sold for advisory clients of 2MCAC. This circumstance is communicated to our clients on an ongoing basis. As fiduciaries, we prioritize our clients’ interests above those of our corporate and personal accounts to avoid conflict and adverse selection in trading these commonly held interests.

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.

S&P disclosure:   S&P Global Market Intelligence LLC. Contains copyrighted material distributed under license from S&P.