The State Of REITs: December 2025 Edition

REIT Performance

After a couple of tough months, the REIT sector rebounded in November with a +1.02% return. This narrows the year-to-date negative total return to -2.55% for the average REIT. REITs outperformed the broader market in November with average returns exceeding that of the Dow Jones Industrial Average (+0.5%), S&P 500 (+0.2%) and NASDAQ (-1.4%). The market cap weighted Vanguard Real Estate ETF (VNQ) more than doubled the return of the average REIT in November (+2.42% vs. +1.02%) and has handily outperformed year-to-date (+5.63% vs. -2.55%). The spread between the 2026 FFO multiples of large cap REITs (16.2x) and small cap REITs (12.8x) widened in November as multiples expanded 0.2 turns for large caps and 0.1 turns for small caps. Investors currently need to pay an average of 26.6% 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.

In November mid cap (+3.53%), small cap (+3.38%) and large cap REITs (+0.32%) averaged gains, whereas micro caps (-8.76%) struggled. During the first eleven months of 2025, large cap REITs have outperformed small caps by 60 basis points.

9 out of 18 Property Types Averaged Positive Returns in November

Half of REIT property types averaged a positive total return in November. There was an enormous 33.18% total return spread between the best and worst performing property types. Data Centers (-10.86%) and Office (-6.06%) struggled in November, whereas Advertising (+22.32%) and Health Care (+8.50%) outpaced all other REIT property types.

Office (-18.35%), Land (-15.55%), Single Family Housing (-15.31%), Infrastructure (-14.17%), Data Centers (-13.93%) and Shopping Centers (-10.27%) have all averaged double-digit negative total returns over the first eleven months of 2025. Health Care (+30.53%) and Advertising (+24.67%) are the only property types to achieve double-digit positive returns year to date.

The REIT sector as a whole saw the average P/FFO (2026Y) increase from 13.5x to 13.7x during November. 50% of property types averaged multiple expansion, 44.4% averaged multiple contraction and 5.6% saw multiples hold steady. Data Centers (22.4x), Land (21.3x), Manufactured Housing (17.7x) and Shopping Centers (17.1x) currently trade at the highest average multiples among REIT property types. Hotels (7.8x) and Office (8.9x) are the only property types that average single digit FFO multiples.

Performance of Individual Securities

OUTFRONT Media (OUT) (+33.01%) led the REIT sector in November, surging after posting very strong Q3 earnings and raising guidance. After the strong November share price gain, OUT is now the 9^th best performing REIT thus far in 2025.

Office Properties Income Trust (OPI) (-54.53%) continued to freefall throughout November after filing for Chapter 11 bankruptcy on October 30^th. The brutal November performance brings OPI’s YTD total return to -98.25%.

68.15% of REITs had a positive total return in November. REITs have averaged a -2.55% year-to-date total return in 2025, which is 1300 basis points behind the +10.45% return for the REIT sector over the first 11 months of 2024.

For the convenience of reading this table in a larger font, the table below is available as a PDF as well.

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 11/30/2025) to lowest dividend yield.

For the convenience of reading this table in a larger font, the table below is available as a PDF as well.

Although a REIT’s decision regarding whether to pay a quarterly dividend or a monthly dividend does not reflect on the quality of the company’s fundamentals or operations, a monthly dividend allows for smoother cash flow to the investor. Below is a list of equity REITs that pay monthly dividends ranked from highest yield to lowest yield.

Economic Health

Corporate bankruptcies in November declined month-over-month from October, but remain highly elevated. 2025 has already seen more bankruptcies in the first 11 months than any full year since 2010. With the Federal Reserve having just cut rates another 25 basis points at the December meeting and potentially continuing to cut throughout 2026, highly leveraged and financially strained companies may soon be able to refinance some of their high-interest rate debt at lower rates. This potential reduction in interest costs could help guide the number of corporate bankruptcies back downward in 2026 after a sharp upward spike in 2025.

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.

For the convenience of reading this table in a larger font, the table below is available as a PDF as well.

Takeaway

The large cap REIT premium (relative to small cap REITs) widened in November and investors are now paying on average about 27% more for each dollar of 2026 FFO/share to buy large cap REITs than small cap REITs (16.2x/12.8x – 1 = 26.6%). 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 (-6.67%) and mid cap REIT (-8.48%) trade at single-digit discounts to consensus NAV. Small cap REITs (-24.19%) trade around 3/4 of NAV while micro caps (-31.33%) trade for a little over 2/3 of their respective NAVs.

Contrary to the REIT Sector’s Underperformance, REITs Continue to Achieve Growth at the Property Level

In Q3 2025 the median implied cap rate for REITs fell 10 basis points from Q2 and 48 basis points year-over-year down to 7.7%. The median implied REIT cap rate has decreased 5 quarters in a row, but remains elevated compared to pre-covid levels.

Median implied cap rates are highest among Hotel and Office REITs and lowest for Residential and Industrial REITs.

REIT median same-store occupancy ticked up to 94.4% in Q3 2025 rising from 94.2% in the 2^nd quarter. Same-store occupancy has trended upward since bottoming out in 2020 due to government-imposed lockdowns. SS-NOI growth decelerated in Q3 but remains solidly positive.

SS-NOI growth trends vary among the big four property types with Industrial seeing the strongest growth followed by Retail and Residential. Office SS-NOI growth continues to trend downward falling deeper into negative territory in Q3.

In Q3 2025 REITs averaged 2.3% year-over-year SS-NOI growth led by Data Centers (+8.0%), Industrial (+5.2%), Health Care (+4.1%) and Shopping Centers (+4.1%). Office (-3.4%) and Self-storage (-2.0%), however, are currently suffering through negative SS-NOI growth.

Gladstone Land (LAND) (-20.4%) had the worst SS-NOI growth in Q3 followed by 5 Office REITs: Creative Media & Community Trust (CMCT) (-10.7%), Hudson Pacific Properties (-10.7%), Vornado Realty Trust (VNO) (-8.2%), Paramount Group (PGRE) (-8.0%) and Empire State Realty Trust (ESRT) (-7.8%).

NexPoint Diversified Real Estate Trust (NXDT) (+26.5%) saw the highest SS-NOI growth in the 3^rd quarter while double-digit growth was also achieved by American Healthcare REIT (AHR) (+16.4%), Welltower (WELL) (+14.5%) and UMH Properties (UMH) (+12.1%). While high growth WELL and AHR trade at enormous NAV premiums and very high FFO/share multiples, UMH is in a very different position. UMH has much stronger growth than their Manufactured Housing peers Sun Communities (SUI) and Equity LifeStyle Properties (ELS), but trades at a deeper NAV discount and an FFO multiple that is several turns lower. Although investors often need to pay a premium for growth, opportunities do emerge sometimes in which superior growth can be attained at a surprisingly favorable relative valuation.

Editor’s Note: This article covers one or more microcap stocks. Please be aware of the risks associated with these stocks.