drewtalksmoney

2025 proved to be quite a tough year for the real estate market, lagging behind trends in the broader market. Borrowing costs were inflated due to high, persistent interest rates. This reduced the attractiveness of debt-heavy REITs, hence reducing profit margins for the sector. Furthermore, this dynamic was exacerbated by the aftermath of the pandemic; we are seeing an increased trend towards remote work, hence vacancies in office and retail spaces have increased. 

Underperformance can also be attributed towards the significant CapEx spending on AI-tech stocks, driven by the AI frenzy. Despite these headwinds, I believe the following year provides a possibility of strong rebounds in this sector. Many property markets are now operating at discounted valuations; posing an attractive investment vehicle. 

Furthermore, the prospect of further interest rate cuts in 2026 provides further incentives for housing financing; notably in acquisitions and developments. As yields from commercial banks fall, the dividend yields from REITs will begin to look more attractive, providing cash flow to investors amidst the uncertain global backdrop of 2026. Monthly dividend yield is currently sitting around 6.2%. 

Realty Income’s diversified portfolio between industries and countries as a REIT that I will be looking into. The company has recently expanded further into Europe, allocating capital effectively into growth regions. Current undervaluation of the company provides a strong basis for the stock as a long-term option.