The State Of REITs: October 2025 Edition

REIT Sector Performance - The REIT sector averaged a small negative return of -0.73% in September and remains modestly in the red year-to-date at -1.74% [1] - The average REIT underperformed compared to the broader market, which saw gains from major indices: Dow Jones Industrial Average (+2.0%), S&P 500 (+3.6%), and NASDAQ (+5.7%) [1] - The Vanguard Real Estate Index Fund ETF Shares (VNQ) outperformed the average REIT in September with a return of +0.07% and has significantly outperformed year-to-date at +5.72% [1] - The spread between the 2026 FFO multiples of large-cap REITs (16.4x) and small-cap REITs (13.9x) widened, indicating that investors are currently paying an average of 28.8% more for each dollar of FFO from large-cap REITs compared to small-cap REITs [1] Property Type Performance - Only 27.8% of REIT property types averaged a positive total return in September, with a narrow 10.69% total return spread between the best and worst performing property types [6] - Single Family Housing (-5.77%) and Infrastructure (-5.41%) were the worst-performing property types, while Data Centers (+4.92%) and Office (+3.11%) averaged the best total returns among REITs [6][7] - Year-to-date performance shows Hotels (-13.61%), Shopping Centers (-10.74%), and Land (-10.48%) have significantly underperformed, while Health Care (+21.83%) has outperformed with average gains more than double that of any other REIT property type [8][9] FFO Multiples and Valuation - The average P/FFO (2026Y) for the REIT sector rose from 13.8x to 14.1x during September, with 27.8% of property types experiencing multiple expansion [11] - Data Centers (24.6x), Land (22.6x), Manufactured Housing (17.2x), and Multifamily (17.1x) currently trade at the highest average multiples among REIT property types, while Hotels (7.2x) and Office (9.7x) are the only types with single-digit FFO multiples [11][12] Individual Security Performance - Office Properties Income Trust (OPI) saw the largest gain in the REIT sector in September at +54.26%, but remains the 3rd worst performing REIT year-to-date at -65.72% [13] - Wheeler Real Estate Investment Trust, Inc. (WHLR) was the worst-performing REIT in September with a decline of -29.27%, continuing a multi-year share price collapse with a total return of -99.73% over the first three quarters of 2025 [14] - 37.42% of REITs had a positive total return in September, while the average year-to-date total return for REITs in 2025 is -1.74%, significantly lagging behind the +9.61% return for the sector in the first nine months of 2024 [14]