Broad gauges of real estate investment trusts (REITs) aren’t setting the investment world ablaze in the first quarter of 2026. However, the real estate sector is outperforming the broader market. The group’s decent start to the year could be a sign of more strength to come.
That would be good news for ETFs such as the actively managed ALPS Active REIT ETF (REIT). For advisors and investors considering ETFs like REIT, history is meaningful. Recent research published by Nareit confirms as much.
On the four occasions spanning 2006 to 2026 in which real estate stocks delivered strong gains in the first two months of the year, that trend held up. The sector typically delivered positive annual returns.
Is a REIT Replay in Store for 2026?
ALPS could be a winner in the near- to medium-term outlook if past precedent repeats.
“In three of four instances, REIT annual performances bested early strong gains by substantial margins,” observed Nareit. “Across those four years, REITs, on average, started the year with a two-month total return of 9.6% and ended the year with a total return of 25.0%, an average increase of 15.4%. Past results may not be indicative of future performances, but history shows that early REIT gains generally have signaled the potential for a strong year.”
Another point of in favor of REIT is its aforementioned status as an actively managed ETF. The various real estate sub-industry groups don’t behave in identical fashion. Moreover, active management in a sector long dominated by passive structures is worth considering. This is particularly true as artificial intelligence (AI) is seen weighing on some segments (office REITs) and benefiting others (data centers).
Then there’s the possibility of the Fed postponing interest rate cuts for the duration of 2026. Investors may want to embrace the real estate stocks with the best balance sheets and least amount of rate sensitivity. Active management may assist with those objectives. And yes, history could help, too.
“In the first two months of 2026, REITs posted a total return of 10.5%, marking the second strongest start of the calendar year for REIT gains since 2006,” adds Nareit. “While the Iranian conflict has tempered YTD REIT performance, total return has remained positive; it was 7.6% as of March 16. Continued solid operational performance and disciplined balance sheets, highlighted in Nareit’s REIT Industry Tracker, should further assist REITs in maintaining their gains this year. In the current environment, it appears that early gains continue to signal a strong year for REITs.”
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