Despite the lack of help from the Federal Reserve in the form of interest rate cuts this year, real estate stocks and the related ETFs are performing well. Just look at the ALPS Active REIT ETF (REIT ). Confirming the benefits of the active management/real estate marriage, REIT is up 14.66% year-to-date, an advantage of more than 500 basis points over the largest passively managed real estate ETF.
Read more: Navigating Shifting Markets With Active REITs
Some of the enthusiasm for real estate stocks and ETFs such as REIT is easily explained. With some experts saying the market has become one big artificial intelligence (AI) trade, market participants are looking for segments with relatively low correlations to AI. Defensive sectors, of which real estate is one, answer that call, confirming there’s near-term allure with ETFs like REIT.
Fundamental Factors Point to REIT Upside
Obviously, REIT is on a torrid pace this year, but the good news for investors is at least twofold. First, the ETF’s 2026 rally can extend. Second, that thesis has roots in a compelling fundamental outlook for the real estate sector, including signs of sturdiness in the oft-maligned office sector.
“Broad office market fundamentals showed that the sector is in the early stages of its space market equilibrium. Although net absorption fell short of net deliveries for retail, apartments, and industrial in the first quarter of 2026, each sector’s upward trajectory indicated continued progress toward balancing demand and supply,” noted Nareit.
There are also signs of occupancy stabilization in some of the sub-industry groups to which REIT has exposure. That’s important to investors considering the ETF because some of those groups experienced negative occupancy trends in recent years.
“Retail occupancy has generally maintained a consistent level for the past few years; it was 95.6% in early 2026. Industrial, apartment, and office occupancy rates have followed downward trajectories, but have shown recent signs of stabilization,” added Nareit. “As of the first quarter of 2026, the industrial, apartment, and office occupancy rates were 92.5%, 91.5%, and 86.0%, respectively.”
Also additive to the REIT thesis, several of the marquee real estate sub-groups are nearing what Nareit calls “equilibrium,” a potentially positive sign for long-term investors.
“CoStar data indicate that the office sector is in the nascent stages of its supply-demand equilibrium and the retail, apartment, and industrial sectors are making significant strides toward reaching their respective equilibriums. These positive developments are anticipated to result in rising occupancy and rental rates, broadly benefiting property operational gains in 2026,” concluded Nareit.
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