Hoya Capital: REIT Earnings Halftime Shows Broad Real Estate Rebound

We're at the halfway point of real estate earnings season, with 70 of the 150 equity REITs and 22 of the 38 mortgage REITs representing 60% of the total market capitalization now having reported results.

Overshadowed by one bombshell "miss" from a surprising culprit, REIT earnings season has actually been trending positively thus far.

Of the 65 equity REITs that provide full-year guidance for Funds from Operations ("FFO"), 47 (72%) raised their full-year outlook, 12 (18%) maintained their outlook, while just six (9%) lowered their guidance - above the historical average "beat rate" for the third quarter of roughly 65%.

Property-level metrics have posted similar trends, with roughly 60% of REITs raising their full-year Net Operating Income ("NOI") outlook - upside driven primarily by lower expenses rather than improved revenue growth - consistent with the "disinflation" theme observed last quarter.

Solid trends across most of the real estate sector come alongside a similarly strong start to earnings season across the broader U.S. equity market.

FactSet reports that 87% of S&P 500 constituents have topped consensus Earnings Per Share ("EPS") estimates - well above the 10-year average of 75% and on pace to be the stongest quarter of "beats" since 2021.

Since the start of earnings season in mid-October, the Equity REIT Index (VNQ) is higher by 0.9%, slightly lagging the 1.6% gain from the S&P 500 during this time.

While performance in the REIT sector can often be driven by macro forces -especially around events like Fed meetings - this earnings season has largely seen stock performance track the quality of the reported results, with gains led by industrial, healthcare, and data center REITs.

Overarching trends thus far have generally been consistent with the "green shoots" identified in our REIT Earnings Preview. 

Industrial REITs have been the clear winner thus far, with results showing a surprising rebound in logistics leasing activity after a tariff-related pause. 

Senior Housing REITs - the perennial performance leader - have reported another stellar quarter, highlighted by frenzied acquisition activity by Welltower. 

Data Center REITs have shown that they can hang with the tech "big boys" amid the ongoing AI boom, with near-zero vacancy and impressive pricing power. 

Net Lease REITs, meanwhile, have accelerated their pace of acquisition activity as cap rates have ticked higher, resulting in increasingly attractive investment spreads. 

Strip Center REITs are pacing for another impressive quarter of near-record-high occupancy rates and double-digit rent spreads, pushing back on concerns over cracks in retail fundamentals.

Favorable expense controls helped Single Family Rental REITs deliver a solid FFO and NOI boost despite continued sluggishness in residential rent growth across most markets.

Mortgage REITs, meanwhile, are on pace for their strongest quarter in a half-decade from both a book value and earnings perspective.

Also of note, while stock performance trends would suggest otherwise, the three laggards this earnings season - Self-Storage, Casino, and Cell Tower REITs - have delivered a perfect 7-for-7 in FFO guidance increases.

Stealing the show for all the wrong reasons this earnings season, Lab Space REIT Alexandria reported the lone "bombshell" report thus far in an investor relations disaster that left analysts and investors feeling bamboozled.

ARE coyly warned of "2026 Considerations" that hinted in coded language at a major reduction in its FFO and dividend in a head-scratching earnings report and equally frustrating earnings call in which management insisted on withholding further details until its Investor Day next month.

An embarrassing snafu for a REIT that has been the perennial winner of NAREIT's communications and transparency award, ARE was forced to clarify in a subsequent 8-K release that it expects a 25-30% decline in FFO in 2026, effectively erasing its sector-leading cumulative 30% growth from 2020-2024.

While we haven't seen other major bombshells, results from the lone Hotel REIT to report thus far suggest that the back-half of earnings season may see quite a few downside revisions amid clearer signs of cracks in the mid-to-low-income consumer.

Results from Apartment REITs have also been modestly disappointing, with results showing the early-year reacceleration in multifamily rent growth has fully reversed in recent months, even in the previously hot Northeast and Midwest markets. 

Office REITs are responsible for the two other downward FFO revisions thus far, minor blemishes in an otherwise encouraging quarter that saw record-setting leasing activity.