Real estate stocks and REITs initially performed stably from October to the end of March, with intermittent declines at the end of the year and a recovery at the beginning of the year. The FTSE EPRA Nareit Index returned 3.0% in North America and -2.5% in Europe over six months, both outperforming the broad equity market, but lower. In many segments, real estate stocks on both sides of the Atlantic are trading at discounts to net asset value, with the exception of parts of the US market such as healthcare, net lease and data centres.
However, with the start of the Iran war at the end of February, there were significant market distortions as a result of rising energy prices and supply risks. Increasing inflation and interest rate risks are particularly relevant for the industry.
"Low valuations compared to the market as a whole and a lower susceptibility to disruption in most real estate segments compared to AI could prove to be an advantage in the medium term – provided that interest rate developments do not counteract this," says Dr. Karim Rochdi, Managing Partner of AVENTOS.
Winners (senior living) and losers (office properties)
The increasingly burdensome effect of AI technology on investors' assessment of future demand for office space is noticeable. Accordingly, many stocks in the segment are then among the biggest price losers of the first half of the year. The "Top 15" of the lowest returns or the largest losses includes a total of seven North American office REITs for the current period. Half-year winners are mainly to be found in the healthcare segment, which is experiencing a structural upswing.
In the list of outperformers of the past six months (as of March 31), this time there are two North American operators of senior housing offerings, namely the Canadian Extendicare Inc. (+79%) and the US Brookdale Senior Living Inc. (+62 %). With a gain of 60% over the past six months, Peakstone Realty Trust achieved the third-highest return. In recent years, Peakstone has gradually divested itself of large parts of its office portfolio and acquired so-called industrial outdoor storage assets (IOS).
The underperformers of the past six months were primarily North American office providers, with Hudson Pacific Properties (-69%) and Allied Properties REIT (-54%) in second and third place. However, investors in Fermi Inc. suffered the highest loss on a total return basis in this six-month period at 82%. The company, which has only been listed on the stock exchange since October 2025, set out with the vision of developing a gigantic data center project on a plot of land of approximately 21 km² in the Texas Plateau.
M&A activities: A lot of
movement among self-storage operatorsM&A activity is currently driven by Public Storage's proposed acquisition of National Storage Affiliates for approximately $10.5 billion, which is expected to close in the third quarter. The transaction exemplifies the ongoing consolidation in the US self-storage market. The sector offers particularly high efficiency potential due to standardized assets and scalable platforms, which further drives deal momentum. One of the largest transactions is also the planned sale of Australia's National Storage REIT to Brookfield and GIC for around AUD 4 billion.
The picture is complemented by the announced privatization of Veris Residential (approx. 3.4 billion US dollars), after the company has shifted its focus to residential real estate in recent years.
ACM Sector Momentum
The "ACM Sector Momentum" indicator compares the current pricing of a sector based on the implied cap rates with the pricing of the overall market and compares the price difference with the historically observed implied cap rates (since 2021). A sector with a negative momentum value is therefore priced relatively low on the stock exchanges by historical standards, while a sector with positive momentum is relatively high – always measured by the implied cap rates. Relatively high implied cap rates correspond to relatively low valuations.
The entire report as well as other publications by AVENTOS on real estate stocks and REITs can be found in the AVENTOS Capital Markets MAGAZINE. There you will find current technical articles from AVENTOS Capital Markets, such as detailed equity research papers and well-founded market commentaries by AVENTOS experts.
