Broadly speaking, real estate investment trusts (REITs) and the related ETFs didn’t do much worth writing home about this year, but there’s optimism these income-generating assets are in store for better showings in 2026.
Speaking of real estate income, the NEOS Real Estate High Income ETF (IYRI) is one of the standouts in the REIT ETF space. The actively managed IYRI sells call options on ETFs that track the Dow Jones U.S. Real Estate Capped Index – a broad, widely observed gauge of U.S.-listed REITs.
In other words, IYRI is an easy-to-understand options-based ETF, but don’t let that simplicity betray this ETF’s income-generating potency. A distribution rate of 10.77% (as of November 30) confirms this fund goes above and beyond in a sector known for above-average levels of income. Fortunately, there’s more to the IYRI story than income. If Wall Street is correct, investors might be able to garner some capital appreciation with this fund in 2026.
Improving Outlook for REITs
A potential 2026 catalyst for the real estate sector and one that could benefit IYRI if it comes to pass is the expectation of increased mergers and acquisitions activity, which analysts expect will be applicable to an array of real estate subgroups.
“Growing acquisition pipelines were a key theme across most sectors as resilient fundamentals and moderating interest rate volatility is bringing more sellers to the table,” noted Jefferies analyst Jonathan Petersen. “The disconnect is which REITs have the cost of capital to support acquisitions. For Healthcare, management teams are in a position of strength to allocate capital to Senior Housing, where assets are trading at or above 7% initial cash yields. Across Shopping Centers and Net Lease, management teams are messaging accretive opportunities, although cost of capital is more of a constraint for some.”
Then there is the artificial intelligence (AI) component, meaning data center demand is expected to remain robust in the new year. That could benefit IYRI because the Dow Jones U.S. Real Estate Capped Index is home to data center REITs.
“Management teams are prioritizing this segment over hyperscale builds given its recurring revenue profile and critical connectivity for workloads,” added Petersen. “We view the setup for both names as favorable heading into 2026, particularly following disappointing 2025 stock performance that, in our view, overlooked the improving growth trajectory for these businesses.”
The analyst also points to an improving supply backdrop in the real estate sector, noting the related stories for office, retail and senior housing REITs are well understood and similar signs are emerging with industrial and residential REITs.
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