Perspective

As we look to the year ahead, we feel increasingly positive about the global real estate market, despite lingering uncertainty. New or potential government policies combined with geopolitical risks suggest increased macroeconomic volatility and a wider range of potential outcomes, suggesting 2026 will be a stock-picker’s market.

Easterly’s goal is to make portfolios better. Easterly Ranger’s investment philosophy aims to provide lower correlation to the overall public real estate market while still seeking to outperform it, creating the opportunity for investors to capitalize on high-conviction investments in a variety of market conditions.

Macro Trends: Resilience & Divergence

The expansion of the global economy that began after the COVID-19 pandemic has remained consistent, despite inflation remaining sticky. Nearly all central banks have transitioned from hiking interest rates to easing them. The U.S. economy continues to show strength by consistently outperforming almost every other country’s economy, highlighting a key theme from 2025 that’s expected to continue in 2026: divergence. The growth gap between the U.S. and the rest of the world (RoW) continued to widen in 2025, and U.S. real gross domestic product currently stands above its projected pre-pandemic path. Meanwhile, the RoW continues to maintain a negative gap.

When looking at 2026, our baseline projection is leaning toward moderate but strong global economic growth and global core inflation remaining close to 3%. We expect that the success of the U.S. economy will drive the U.S. equity market forward.

However, we maintain a mixed outlook on non-U.S. markets. The slowdown in China, potentially extended by the impact of tariffs imposed by the Trump administration, could continue to hinder growth.

 
Factors that could bode well for the global real estate investment trust (REIT) market in 2026 and beyond include:

• The implementation of recent U.S. tax reforms along with the U.S. administration’s efforts to reduce the regulatory burden could help drive growth globally.
• U.S. inflation seems to be under control, albeit with upside risk due to the transmission to prices resulting from tariffs, and it appears to be on a trajectory lower than the Fed’s 2% target.
• Long-term interest rates (7-10 years, which serve as the cost of capital benchmark for commercial real estate) peaked at 5% in October of 2023 and then declined to below 4% before stabilizing, therefore becoming less of a headwind and creating even a bit of a tailwind for most property types.
• Commercial real estate industry fundamentals (i.e., the balance between supply and demand) remain healthy for most property types and even strong for many, including industrials/logistics, senior housing and data centers; the latter two of which are among the specialty property types that are favored by our portfolio management team.
• The very large delta in performance since 2022 between public REITs and private real estate vehicles created a wide valuation gap. This, combined with the continued surge in merger and acquisition activity, has shown a willingness among buyers to pay an additional premium, making public REITs an attractive investment opportunity.

While we’re bullish about these trends, there could be some risks as well. The impending tax cuts and deregulation in the U.S. could benefit the REIT sector while simultaneously introducing some additional risks, such as an increase in supply driven by new property development. At the same time, exogenous events could impact economic fundamentals, although synchronized central bank monetary easing stands ready to buffer any potential economic shock.

Confident or Cautious? Sector-Specific Opportunities and Risks

Based on the current trends we’re seeing, and even some trends on the horizon, we’ve analyzed specific sectors in this market to determine if their strength might waver or if tailwinds could help them prevail.

Favored Sectors (Property Types with Tailwinds)
Senior Housing: The sector is transitioning from post-pandemic recovery to, now, growth. Demographic tailwinds, such as aging baby boomers entering care, are combining with limited new supply and a shift toward unified operational models. The move from triple-net leases to operating platforms adds upside via earnings leverage and margin control. Public REITs are leading the way in professionalizing operations, improving staffing models, and capturing economic upside. We expect meaningful margin expansion and occupancy gains in 2026, with average occupancy to exceed 90% by year-end.

Data Centers: Demand for digital infrastructure remains exceptional, driven by artificial intelligence workloads, cloud-computing expansion, and hyperscale leasing. Power availability and construction timelines have become the key constraints, creating durable pricing power for well-located operators. With limited new capacity and sustained pre-leasing, occupancy and rent growth should stay strong through 2026. REITs with access to power, scalable campuses, and hyperscale relationships are positioned to deliver above-trend growth and continued multiple support.

Industrial/Logistics: After a soft patch in 2025, rents are expected to turn modestly positive. Structural drivers such as e-commerce, nearshoring, and scarcity of modern space remain intact. However, selectivity matters: newer assets in infill locations should lead, while older assets in oversupplied markets may lag. We continue to favor platforms with embedded rent growth, value-adding development pipelines, and a diversity of strong tenants.

Cautious Sectors (Property Types with Headwinds)
Office: Investor sentiment remains weak for office spaces. Performance will be highly bifurcated. Modern, ESG-certified, amenity-rich assets may hold up, but legacy buildings face secular headwinds. Leasing remains expensive, with tenant concessions eroding net effective rents. We remain skeptical of a broad-based recovery and thus continue to avoid commodity office exposure. The sector may offer selective value in repositioning plays, but execution risk is high.

Self-Storage: Oversupply and price wars continue to weigh on fundamentals in the self-storage sector. Even with a housing rebound, the medium-term outlook remains challenged. New supply delivered post-pandemic has outpaced demand, and while rents may be bottoming, we see limited catalysts for near-term recovery. Operators with strong local market share and dynamic pricing tools may outperform, but the sector overall faces a tough setup.

Cold Storage: After two volatile years, the outlook for cold storage remains negative. Operators have made efficiency gains, but fundamentals are still weak. Inventory levels remain below pre-pandemic norms, pricing power has eroded, and utilization rates are uneven across markets. Labor and energy costs continue to pressure margins, and incremental supply from speculative development is keeping rent growth muted. While public REIT platforms have improved systems and cost discipline, those efforts mainly offset deterioration rather than drive growth. We see limited upside for 2026 without a meaningful rebound in consumer demand or inventory restocking.

Conclusion

The Easterly Ranger investment team remains cautiously bullish on real estate. Fundamentals remain healthy and we believe that winning in real estate will require deep expertise that comes from vast experience navigating different market cycles. Understanding how different sectors react to each market cycle is crucial, and with policy uncertainty and geopolitical stress looming in the background, it’s more important than ever to actively maneuver strategies to adapt to changing conditions.

Our high-conviction, benchmark-agnostic investment approach allows us to be highly focused on identifying and owning only what we believe are the 50 highest-quality companies in our investable universe of more than 500 companies. We have high confidence in our fundamental research as well as in the management teams of the companies we own. Macroeconomic volatility and geopolitical uncertainty have caused significant distractions for investors in the global capital markets. However, as these tensions ease, we believe investors will return their attention to the fundamental pieces that constitute a strong investment, allowing our portfolio to be well-positioned in 2026.

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