Active REIT ETF Surges 10% as Sector Stages Comeback

Core Insights - The ALPS Active REIT ETF has surged 10.4% year-to-date through mid-February, indicating a significant recovery for real estate investment trusts (REITs) after a decline of 0.68% in 2025 [1] - REITs are now outperforming equities by nearly 10% year-to-date, reversing a trend where they lagged behind equities by approximately 10% over the past five years [1] - The recovery is attributed to a reset in property values and changing market conditions, with REITs currently trading at about a 20% discount compared to private real estate funds [1] Market Conditions - The broader REIT market offers a dividend yield of 3.98%, significantly higher than the S&P 500's yield of 1.09% [1] - The REIT market, excluding the health care sector, is trading at a 21% discount to net asset value, presenting an opportunity for investors [1] - A major factor in the REIT recovery is the decline in new construction, with industrial supply down 70% and apartment supply down 30% from their 2023 peaks [1] Investment Strategy - The active management approach of the REIT fund focuses on high-demand areas, such as data centers, which are performing well due to their support for AI infrastructure [1] - The fund maintains a significant allocation to health care at 17.7%, benefiting from earnings growth in senior housing [1] - The office component of the REIT universe has decreased to just 3%, allowing the fund to avoid major exposure to distressed office properties [1]