REITs in 2024: What Actually Happened

Real estate investment trusts (REITs) had an uneven year in 2024. Some sectors—particularly data centers and industrial warehouses—saw strong performance as companies rushed to build infrastructure for artificial intelligence. Other sectors, especially office REITs, continued to struggle as remote work kept office occupancy rates low in major cities. The performance of any individual REIT depended almost entirely on what type of property it owned and where those properties were located.

If you are reading this after 2024, the specific numbers have already changed. REIT performance shifts with interest rates, property values, and tenant demand—all of which move month to month. What matters more than any single year's returns is understanding which property types tend to perform in which economic conditions, and what information you need to look at before putting money into any REIT.

Key Takeaways

  • REIT performance in 2024 varied sharply by property type: data centers and industrial properties generally outperformed, while office and retail REITs faced headwinds.
  • Interest rate changes affect REIT returns directly because REITs borrow money to buy properties, and higher rates increase their costs.
  • Past performance—whether strong or weak—does not predict future results; a REIT that did well in 2024 may underperform in 2025 if economic conditions shift.
  • Before investing in any REIT, you need to understand what properties it owns, how much debt it carries, and what percentage of its income goes to paying dividends.

Why REIT Performance Splits by Property Type

REITs own different kinds of real estate: apartment buildings, office towers, shopping centers, warehouses, data centers, hotels, and medical facilities. Each type responds differently to economic changes. In 2024, data center REITs benefited from the surge in artificial intelligence spending. Industrial and logistics REITs—companies that own warehouses and distribution centers—performed well because e-commerce and supply chain reshoring kept demand high. Apartment REITs had mixed results depending on their location and tenant base.

Office REITs continued to struggle. Remote work reduced how much office space companies need, and many office buildings built in the 1980s and 1990s are now harder to lease or refinance. Retail REITs faced similar pressure as shopping patterns shifted online, though some performed better than others depending on whether they owned grocery-anchored centers (which held up better) or traditional malls.

This fragmentation means that saying "REITs did well" or "REITs did poorly" in 2024 is not accurate. You have to look at the specific property type and the specific REIT's portfolio.

How Interest Rates Shaped REIT Returns

REITs borrow money to purchase properties. When the Federal Reserve raised interest rates in 2023 and held them steady through most of 2024, the cost of that borrowing went up. A REIT that refinanced a loan at 3 percent in 2021 might have faced a 6 or 7 percent rate when that loan came due. That higher cost reduces the money left over to pay shareholders.

Interest rates also affect how investors value REITs. When bond yields are high, some investors move money out of REITs and into bonds because bonds become more attractive. When rates fall, the reverse happens—REITs become more appealing. In 2024, rates stayed elevated, which kept pressure on many REIT valuations even when the underlying properties were performing well.

If you are considering a REIT investment, check what percentage of its debt matures in the next one to three years. A REIT with a lot of debt coming due soon faces more refinancing risk than one with debt spread across many years.

What to Look at Before Investing in Any REIT

Past performance is not a guide to future results. A REIT that outperformed in 2024 could underperform in 2025 if interest rates fall (which would hurt its relative attractiveness) or if its property type falls out of favor. Before investing, examine these concrete details:

Debt levels and maturity schedule. Look at the REIT's debt-to-equity ratio and when its loans come due. High debt and near-term maturities mean more refinancing risk. Most REITs publish this in their quarterly earnings reports.

Dividend payout ratio. REITs are required to distribute at least 90 percent of their taxable income to shareholders. Check whether the REIT is paying out more than its actual cash flow—a sign it may cut the dividend if conditions worsen. This number appears in the cash flow statement.

Occupancy rates and tenant quality. A REIT that owns properties with high vacancy or tenants on the verge of bankruptcy faces income risk. Look for occupancy rates above 90 percent and tenants with stable credit ratings.

Geographic concentration. A REIT that owns most of its properties in one city or region faces more risk if that market weakens. Diversification across geographies and property types generally reduces volatility.

Data Centers and Industrial: The 2024 Winners

Data center REITs benefited from real, measurable demand. Companies building artificial intelligence systems need enormous amounts of computing power, and that power requires specialized facilities with reliable electricity and cooling. REITs that owned data centers—particularly those with properties near major tech hubs or with access to cheap power—saw strong leasing activity and pricing power in 2024.

Industrial and logistics REITs also performed well. E-commerce continues to require warehouse space closer to population centers. Companies also moved manufacturing and supply chains back to North America to reduce dependence on overseas production, which increased demand for industrial real estate. These trends are structural—they are unlikely to reverse quickly—but they are also already priced into current REIT valuations, so future returns may be more modest than 2024's.

Office and Retail: The 2024 Challenges

Office REITs faced persistent headwinds. Major tech companies and financial firms reduced their office footprints or delayed expansion plans. Older office buildings struggled to attract tenants or command high rents. Some office REITs traded at discounts to the underlying value of their properties, meaning the market was pricing in the possibility of further declines.

Retail REITs had a more mixed year. REITs that owned grocery-anchored shopping centers—where a supermarket is the main tenant—held up better because grocery shopping remains a necessity. REITs that owned traditional enclosed malls or fashion-focused centers faced more pressure. A few retail REITs benefited from strong tenant demand and pricing power, but the sector as a whole remained challenged.

Frequently Asked Questions

Should I invest in a REIT that did well in 2024?

Strong 2024 performance does not predict 2025 returns. A data center REIT that outperformed may face slower growth if artificial intelligence spending slows. Before investing, look at the REIT's debt levels, occupancy rates, and dividend sustainability—not just its past returns. Compare it to other REITs in the same property category to see if it is priced fairly.

What happens to REITs if interest rates fall in 2025?

Lower rates would reduce borrowing costs for REITs and make their dividends more attractive to investors compared to bonds. REITs with near-term debt maturities would benefit most because they could refinance at lower rates. However, lower rates might also slow property value growth, so the overall effect is mixed.

Are office REITs a bad investment now?

Some office REITs are trading at steep discounts because the market expects further declines. That creates opportunity for investors with a long time horizon who believe office demand will stabilize. However, office REITs carry more risk than industrial or data center REITs. Only invest in office if you have done detailed research on the specific REIT's properties and tenant base.

How do I know if a REIT's dividend is safe?

Compare the REIT's dividend payout to its actual cash flow from operations, not just its accounting earnings. If the payout ratio is above 100 percent, the REIT is paying out more than it earns and may cut the dividend. Look at the cash flow statement in the quarterly or annual report.

What is the difference between a REIT and a real estate mutual fund?

A REIT is a company that owns and operates real estate and must distribute 90 percent of taxable income as dividends. A real estate mutual fund is a basket of stocks—often including REIT stocks—managed by a fund company. Mutual funds offer diversification but charge management fees; REITs offer direct ownership and higher dividend yields but require more research to evaluate.