Real estate stocks had a strong start to 2025 — in March, the MSCI U.S. REIT Index was up 1.1%, while the S&P 500 was down 1.6% and the Russell 2000 was down 5.2%. However, due to turbulence in equity markets and with the S&P 500 climbing in recent weeks, it’s difficult to say where this will net out. “If a meaningful economic slowdown unfolds, REIT earnings growth should prove more resilient than a lot of other areas of the market,” said Anthony Paolone, co-head of U.S. Real Estate Stock Research at J.P. Morgan. “In the past, we’ve seen S&P 500 earnings come down more and faster than REIT earnings."

Overall, J.P. Morgan Research expects bottom-line funds from operations (FFO) growth of 3% for REITs in 2025, comparable to the level seen in in 2024. This is expected to accelerate to nearly 6% in 2026. “We think investment activity should improve as more real estate assets start to trade again and offer REITs the opportunity to drive growth — hence the acceleration into 2026,” said Paolone. “The growth and opportunities will vary among the property types, but overall we believe a combination of 4% dividend yields, low-to-mid-single-digit FFO growth and some room for valuation to expand could result in approximately a 10% total return.”

Retail

Strong consumer spending and limited supply have supported retail REITs, particularly strip centers. There is currently a solid leasing environment, but the combination of some high-profile bankruptcies, bad debt assumptions and concerns about tariffs is clouding the view slightly. Competition for quality space remains a dynamic, though tenant bankruptcies have offset these headwinds for some. Discretionary spending could be more at risk as consumers begin to feel the squeeze from tariffs and higher inflation.

REITs vs. the broader CRE market

Looking at the bigger picture, there has been a notable recovery in CRE capital markets and leasing activity. Given this dynamic, investment in CRE service companies in particular is picking up pace. This is unique at this point in the cycle, as capital markets have been muted for the last few years and offices — which account for more than 50% of the leasing commission pot — have only just started to see increased activity. In addition, outsourcing and project management services offer additional avenues for growth. “Over the next five years, REIT earnings growth should be in the mid-single-digits, while CRE service company EPS growth should be in the mid-teens or higher — it’s a massive difference,” said Paolone.

Inflation and interest rates have the potential to impact REIT fundamentals and stock performance. Additionally, tariffs could impact tenant health and demand for space, especially in the industrial and retail real estate segments.

If the administration pursues government-sponsored enterprise (GSE) reform, this could impact the multifamily segment. Also, healthcare policy changes could affect demand for life science and medical office space, with broader implications for healthcare REITs.

In terms of property demand, the actions of the Department of Government Efficiency (DOGE) are currently impacting the market in Washington, D.C., where active listings of homes for sale jumped 25.1% year-over-year during the four weeks ending on April 27 — the largest gain on record. “We are watching DOGE closely,” said Paolone. “Federal government employment has real implications on the Washington, D.C., metro real estate picture, and many REITs have exposure to this region.”