Owing in part to its capital-intensive nature, the real estate sector is often viewed as one of the groups most sensitive to interest rate fluctuations. Yet even with some help from the Federal Reserve over the past two years, the sector has disappointed. Some analysts see better things in store for real estate investment trusts (REITs) in 2026. A potential rebound could be fueled by more than Fed assistance. That could bode well for ETFs such as the ALPS Active REIT ETF (REIT).
REIT could be a beneficiary of favorable history. As Jefferies analyst Jonathan Petersen pointed out, the real estate sector has lagged the broader market for four straight years, leading to valuation discounts that are the widest since the dark days of the global financial crisis. He added that the last time the sector lagged for three consecutive years — 1997 through 1999 — six years of outperformance followed.
Why REIT Could Shine in 2026
While the real estate sector is small in terms of percentage commanded in the S&P 500, it’s large in terms of number sub-groups. Not all components of the broader sector move in lockstep. That potentially signals benefits with the actively managed REIT.
An actively managed fund like REIT can target areas of opportunity in the real estate sector. Those include data center and industrial REITs, which Petersen highlighted as potential sources of 2026 strength. Industrial REITs account for almost 14% of the ALPS ETF’s portfolio.
“Data center demand remains robust, as leasing continues to gain momentum,” observed the analyst. “Demand is widening as data center leasing in tertiary markets has outpaced that in primary markets in 2025. This is partially due to supply constraints that have limited large-scale builds within primary markets. However, we expect AI demand from enterprises to accelerate further in 2026, with deployments more heavily skewed to primary metro markets as latency becomes a larger factor for AI workloads.”
The Jefferies analyst also had favorable views on mall and shopping center REITs. That’s noteworthy to investors considering this ETF, because it allocates 14.44% of its roster to retail REITs.
“Shopping center supply remains tight, and strips’ fundamentals should stay resilient as strong lease backlog set to commence in ’26-’27 continues to support net operating income growth,” said the analyst. “Malls are up YTD and trading at a premium to 5Y avg., but strong FY26 earnings growth suggests further upside, particularly for Class A and primary metro-exposed assets, which should support continued rent growth.”
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