Amid tariff-related volatility, certain assets like cell towers and triple-net lease REITS are well positioned to outperform equities, suggests Hazelview
New research from Hazelview Investments has revealed that real estate investment trusts (REITs) are quietly outperforming broader equities and the findings notably come as global markets brace for the impact of ongoing trade disputes and economic uncertainty.
Samuel Sahn, managing partner and portfolio manager at Hazelview Investments, argues that the resilience of REITs isn't a fluke but rather a feature of the asset class that’s becoming increasingly attractive to institutional investors.
He points to similar outcomes in prior episodes of macroeconomic stress, where REITs showed strong performance and “exhibited defensive characteristics, which is exactly what one would look for in REITs,” he said.
The current market cycle has pushed investors to reconsider how they gain exposure to equities, Sahn said. With heightened volatility surrounding trade, GDP, and employment data, investors are opting for asset classes, like REITs, that offer more stable earnings visibility.
“REITs provide investors with income, they provide investors with total return potential, and they also provide investors with the ability to make gains over a full market cycle. One of the benefits that REITs have exhibited in April and to date has been the fact that volatility has come in a bit and that has led to better total return relative to the market.”
He suggests that while investors still want equity exposure, many are pivoting toward more stable, defensive sectors and REITs are benefiting from that shift. Rather than pulling out of the market, they're reallocating within it, looking for assets that can weather economic uncertainty.
“Investors want to be invested in equities but are choosing to perhaps get more of that exposure through defensive property types,” he said.
While REITs are well-positioned during times of uncertainty, certain property types in the sector stand out for their ability to deliver reliable cash flow, noted Sahn, pointing to assets like cell towers, triple-net lease REITs, single-family rentals, data centers, and healthcare facilities which are proving to be particularly resilient.
Their advantage, he explains, often comes down to structural features like long lease durations - 10 to 15 years - which offer greater visibility into future income. In addition, many of these sectors benefit from durable, secular demand.
“These property types should lend themselves to delivering stable, consistent, steady earnings in the face of macroeconomic uncertainty. Despite some uncertainty on the macroeconomic front, those industries should still experience very stable steady demand. And that stable, steady demand is going to lead to stable, steady growth,” said Sahn.
Sahn suggests industrial real estate is feeling the sharpest impact from ongoing tariff uncertainty. Because global trade relies heavily on efficient logistics and warehousing, the unpredictability of tariffs is forcing companies to delay critical decisions.
“It makes committing to long-term leases more difficult,” he said, noting that industrial assets are “the most in the crosshairs” when it comes to trade and supply chain disruptions.
The sector is already seeing slower leasing activity and hesitation around new space commitments, which could notably affect vacancy and occupancy rates in a portfolio and eventually pressure rents.
Additionally, other segments like discretionary retail and leisure travel are also vulnerable as consumers pull back on spending due to job insecurity, and international travel flows remain inconsistent.
Yet, Sahn believes the disruption isn’t long-term.
“As we look out over the next 12-36 months and as we get through that noise and once there’s more clarity around tariffs, we will see an improvement in leasing demand within the industrial space,” he said, adding the same should hold true for travel-related real estate as broader economic conditions stabilize.
However, Sahn acknowledged that not every sector has benefited, noting that data centers, for example, have lagged. But he’s quick to attribute that weakness to isolated events earlier in the year, not a fundamental demand issue.
“We still see very strong demand from hyperscale customers for data center space,” he said, framing the sector’s underperformance as a potential buying opportunity.
Sahn also notes that valuations across the REIT space remain appealing, which is currently trading below its historical average. He emphasized it’s the result of a five-year build-up of pressure on the real estate sector. Since COVID, the asset class has been hit with a series of disruptions, starting with the collapse in travel, shopping, and office usage, followed by rising interest rates and persistent fears of recession.
While some of those trends, such as remote work, are beginning to reverse, the sector is still trading at historically low valuations relative to equities.
For long-term investors, Sahn sees this as an opportunity to rebalance into an undervalued sector poised for mean reversion.
“You want to be buying or adding to sectors and industries that have not been strong performers, because those trends will, at some point in time, reverse,” he said.
And if trade tensions continue, he believes capital will rotate further into defensive areas like REITs, adding that REITs are “set up for success over the next several years.”
“All this uncertainty makes REITs a more defensive stabilizer for one's portfolio. The asset class offers downside protection, it offers income, it offers exposure to real assets, and we think all of those things are powerful combinations for REITs to reign resilient in the current environment,” said Sahn.
