From Data to Dividends: The Quiet Comeback of High-Quality REITs

After nearly two years of relentless pressure from rising interest rates, commercial real estate is beginning to show signs of stabilization. But this recovery isn’t broad-based — it’s selective, driven by fundamentals, sector positioning, and capital discipline.

REITs tied to outdated assets or urban office space remain deeply discounted for a reason. Meanwhile, data center, industrial, retail, and multifamily REITs with exposure to structural tailwinds are outperforming and quietly regaining institutional attention. The result is a more bifurcated REIT market — one where cap rate compression, leasing strength, and dividend visibility are separating winners from the pack.

Data Centers Are Becoming Infrastructure Plays

The rise of AI, hyperscale cloud computing, and edge networks is turning data centers into essential infrastructure — more akin to utilities than traditional commercial real estate. REITs like Equinix (EQIX) and Digital Realty Trust (DLR) are leaning into this identity shift.

Equinix recently committed to ramping capital expenditures to $4–5 billion annually by 2026, targeting long-term deployments from hyperscale clients like Amazon, Microsoft, and Meta. Meanwhile, Digital Realty was upgraded to “Buy” by UBS in July after raising Q2 guidance and citing strong pre-leasing pipelines in power-constrained Tier 1 markets.

Unlike office or retail, data center REITs face supply constraints not in space, but in power availability — a dynamic that supports pricing power and long-term visibility. FFO growth across the subsector is running north of 20% year-over-year, and institutional capital continues to rotate into these names for both cash flow growth and AI exposure.

Industrial & Multifamily: The Sunbelt Advantage

While the headlines continue to focus on cooling housing markets or CRE refinancing risk, Sunbelt-oriented REITs tell a very different story. Industrial players like EastGroup Properties (EGP) and residential names like NexPoint Residential Trust (NXRT) are capitalizing on demographic migration, e-commerce demand, and limited supply pipelines.

EGP reported 46.9% leasing spreads on new contracts in Q1, with NOI up over 13% — evidence that demand for strategically located warehouse and distribution space remains elevated despite macro uncertainty. NXRT, focused on middle-market Sunbelt apartments, has kept occupancy above 95% while pushing rents up 7% year-over-year in metros like Tampa, Dallas, and Las Vegas.

Prologis (PLD), the global logistics giant, remains a long-duration asset story, positioned to benefit from reshoring and inventory reconfiguration across supply chains. While its stock has lagged in 2025, many see the current consolidation as a tactical entry point.

Retail Isn’t Dying — It’s Getting Smarter

Legacy malls and urban storefronts may still be facing structural challenges, but open-air retail and necessity-driven centers are seeing a renaissance. Simon Property Group (SPG), once seen as a bellwether for traditional malls, posted Q2 occupancy of 95.9%, with strong tenant retention and rising lease rates. The company continues to diversify, with international expansion and mixed-use developments that integrate lifestyle, dining, and healthcare services.

Brixmor Property Group (BRX) — focused on grocery-anchored retail — reported rent spreads of over 20% on re-leased space. These centers are becoming more valuable, not less, as consumer behavior shifts toward convenience, accessibility, and experiential retail.

Importantly, these REITs are generating consistent free cash flow, allowing them to raise dividends while avoiding the refinancing risks that plague more leveraged peers.

Dividends Are Climbing, with Quality in Focus

With inflation cooling and rate cuts on the horizon, REITs that have preserved balance sheet strength are beginning to reward shareholders more aggressively. According to CRE Daily, at least 18 U.S. REITs plan to raise dividends in Q3 — including leaders in healthcare, hotels, and data infrastructure.

Welltower (WELL) is seeing a recovery in senior housing occupancy amid an aging U.S. demographic base, while CareTrust REIT (CTRE) — focused on skilled nursing — just received a technical upgrade from IBD after a string of positive earnings surprises.

Yield remains a key component of the REIT trade. With the sector yielding around 4% on average — and some names like SPG exceeding 6% — total return forecasts for 2025 are running in the 8–10% range, according to Uniplan Investment Counsel.

Follow the Flow, Not the Fear

This isn’t a blanket REIT rebound — it’s a capital rotation into quality, growth, and cash flow visibility. Investors burned by the office meltdown or overexposed to rate-sensitive REITs may have walked away from the sector altogether. But in doing so, they’ve overlooked areas of real strength.

Data centers, industrial logistics, Sunbelt apartments, and grocery-anchored retail are all supported by secular demand, pricing power, and disciplined balance sheets. With $11 trillion still parked in money market funds, it won’t take much to push this segment from recovery to rotation.

For long-term investors, the message is clear: REITs aren’t dead. They’re evolving — and in some cases, leading again.

REIT Ticker	Focus Area	Key Stat or Catalyst	Dividend Yield
EQIX	Data Centers	$4–5B capex ramp to meet AI/hyperscaler demand	2.1%
DLR	Data Centers	UBS upgrade, guidance raised Q2 2025	3.7%
EGP	Industrial (Sunbelt)	+46.9% leasing spreads, NOI +13% YoY	2.6%
NXRT	Sunbelt Multifamily	95.5% occupancy, 7% rent growth in key metros	3.4%
SPG	Mixed-use Retail	95.9% occupancy, growing international exposure	6.1%
BRX	Grocery-Anchored Retail	+20.5% re-lease rent spreads	4.4%
WELL	Senior Housing & Healthcare	Demographic tailwinds, occupancy recovery	3.2%
CTRE	Skilled Nursing Facilities	Technical upgrade, strong Q2 guidance	5.3%