REIT Stocks Have Struggled. Where Income Investors Can Find Value.

Simon Property Group’s Roosevelt Field mall in Garden City, New York. (David Williams/Bloomberg)

Shares of many real estate investment trusts, or REITs, have trailed this year. On top of that, they’ve “been in a constant struggle when compared against broader equities,” says Michael Knott, director of U.S. REIT research at Green Street.

The FTSE Nareit All Equity REITs Index is about flat this year through Aug. 18, trailing the S&P 500 index’s 11% result. A culprit is interest rates, which remain elevated and are a headwind for REITs, partly because they’re an additional expense.

“People are waiting for the Fed to lower interest rates, but that has been pushed out,” says Gina Szymanski, chief investment officer for global securities at AEW Capital Management and a longtime REIT investor. The Federal Open Market Committee holds its next meeting on Sept. 16-17. CME Group puts the likelihood of a 25-basis-point rate cut at 71%. (A basis point is a hundredth of a percentage point.)

That said, there are big disparities in returns among REIT sectors. On the plus side, healthcare has returned about 17% this year, says Nareit, a REIT trade group. Gaming is up about 9%. But data centers are off by some 13% year to date, self-storage is off 6%, and lodging/resorts, 13%.

Still, REITs, which must return at least 90% of taxable income to shareholders, remain attractive to dividend investors. Szymanski sees opportunities in retail, despite mixed returns there. “There’s just been a lot of strong retailer demand for space,” she says. “In general, the retail business has found a better balance between e-commerce and physical” locations.

Regional malls have returned about 2% in 2025. But shopping centers fell some 7%. Free-standing categories are up about 9%. “You don’t have to go far out on the risk curve,” says Szymanski, pointing to shopping centers anchored by grocery stores as a way to include a nondiscretionary retailing flavor in a portfolio. She says that there’s a “tailwind of both better demand and limited supply” as construction of new properties has slowed.

One company that offers a way to play that nondiscretionary theme is Phillips Edison, which owns and operates grocery-anchored shopping centers. The stock, which yields 3.6%, is down 8% this year. The Cincinnati company pays its dividend monthly.

Elsewhere, Indianapolis-based Simon Property Group, whose stock yields about 5%, is a broadly diversified REIT with exposure to various retailing real estate, including upscale malls.

In a research note on Morningstar’s website, analyst Kevin Brown observes that the company’s “high-quality properties will continue to provide consumers with unique shopping experiences that are hard to replicate elsewhere.”

In healthcare, Welltower has been a stellar performer, returning about 30% this year. The stock yields 1.8%. Green Street’s Knott says that Welltower boasts strong fundamentals that show up in positive earnings surprises. In the second quarter, for example, the company reported funds from operations per share of $1.28, ahead of the consensus estimate of $1.23, according to FactSet. The company’s growth has also been helped by smart acquisitions, Knott says.

Welltower’s portfolio includes senior housing facilities, both for independent and assisted living, special hospitals, and outpatient medical buildings.

Szymanski says the company has some important demographic trends at its back, including a growing cohort of baby boomers turning 80 who need senior housing and care. “For the last decade, it has been growing about one and a half percent a year,” she says. “And for the next decade, it’s going to grow about 4%, so the growth is more than doubling.” That should help boost the company’s dividend, as well.

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