Market Reawakening: International REITs Outperforming the U.S. for the First Time since 2017

After nearly a decade of U.S. leadership, global real estate investment trusts (REITs) — notably in Europe and Asia-Pacific — have begun to outpace U.S. REIT performance. Asset managers and index providers report that international REITs have delivered stronger returns than their U.S. peers for the first time since 2017, a shift that has prompted investors to re-examine regional real-estate allocations and rethink the story of American dominance in listed property.

This explainer unpacks how we got here, what’s driving the change, who is affected, and what it might mean for cross-border investors going forward.

Background: a decade of U.S. dominance, then divergence

From the late 2010s through the early 2020s, U.S. REITs generally outperformed international peers. The United States benefited from a combination of strong property fundamentals (especially in niche sectors such as data centers and industrial/logistics), outsized flows into U.S. equities, and a domestic economy that outpaced many developed-market peers. That outperformance widened further during the post-COVID market rebound and the tech-driven rally that lifted asset prices across many U.S.-listed real-asset companies.

Yet real-estate markets are cyclical and regionally varied. While U.S. REITs carried high valuations into the mid-2020s, several international markets — particularly parts of Europe and Asia — saw price dislocations, lower valuations and policy moves that made them comparatively attractive to global investors. Over the past year(s), those regional differences have helped international REIT indices overtake U.S. counterparts in total returns.

What’s driving the rebound in international REITs?

Several converging forces explain why international REITs have staged a comeback.

1. Valuation catch-up: International REITs entered the recovery on a cheaper basis than U.S. peers. Regions that underperformed during prior cycles started the recovery with lower price-to-net-asset-value multiples, giving returns more room to run as sentiment normalized. Managers point to “discounted valuations” outside the U.S. as a central explanation for stronger percentage gains.

2. Sector composition — winners outside the U.S.: The global real-estate complex is not uniform. Regions have differing exposures to sectors that performed well in the post-pandemic era — such as data centers, logistics/industrial, life-science/healthcare and niche alternative assets. In some international markets, REITs aligned with those resilient sectors have enjoyed outsized earnings growth and capital appreciation. Conversely, U.S. sector leadership (especially technology-driven property plays) has cooled in places where valuations were already high.

3. Interest-rate trajectories and yield chase: REITs are interest-sensitive because many rely on debt and because yield-seeking investors compare REIT dividends with bond yields. Evolving expectations for rate cuts and differing monetary-policy signals across central banks have created constructive conditions for international listed property in some jurisdictions. Lower or stabilizing rates can reduce refinancing costs and shrink the yield premium investors demand for real-asset equities. Several investment houses argue lower rates would create further tailwinds for global REIT performance.

4. Currency moves and flows: A weaker U.S. dollar can autocatalyze international performance measured in dollars. In periods when the dollar softens, returns from overseas equities and REITs are amplified for U.S. investors — another mechanical reason international real estate can temporarily outperform U.S. listings. Separately, cross-border capital flows have been responsive to both valuation differentials and geopolitical risk appetites.

5. Re-rating and regional policy support: Some countries have implemented measures — tax or regulatory — that support property markets and encourage institutional investment. Combined with improving fundamentals (occupancy gains, rental growth in certain submarkets), this helped lift investor sentiment and valuations in parts of Europe and Asia. Asset managers note that policy support and structural reforms have helped certain international REITs re-rate.

The impact on investors, companies and ordinary people

For cross-border investors: The rebalancing creates opportunities and headaches. On the opportunity side, investors who reallocate into international REITs early captured stronger returns and diversification benefits. On the headache side, a shift in regional leadership requires different research models: country-level legal frameworks, tax treatments for REIT distributions, currency hedging considerations, and different sector exposures. Passive investors using global real-estate indices will see their allocations and risk profiles change depending on which markets lead.

For asset managers and advisers: Fund managers are under pressure to justify regional allocations and to explain recent performance drivers to clients. Those with global mandates may increase emerging- and developed-market weightings outside the U.S., while U.S.-centric funds may emphasize value in underappreciated domestic sectors. Indexed and ETF products that track MSCI or similar benchmarks will reflect any sustained divergence in returns, which could spur product flows.

For tenants and local economies: Stronger REIT markets can translate into increased investment in property maintenance, new development projects, and job creation in construction and real-estate services. However, rising valuations can also push up capitalization rates in hot markets, potentially increasing costs for occupiers (if landlords pass costs through). The effects are highly local: where fundamentals — such as rental demand, supply constraints and wages — are strong, tenants may face tighter markets; where fundamentals lag, benefits are more muted.

For retail investors and savers: REITs are often used for income and diversification. When international REITs outperform, dividend yields and total return expectations change across portfolios. Retail investors should be mindful of currency exposure, dividend taxation differences, and the liquidity profiles of foreign REITs — not all markets offer the same ease of entry and exit as the U.S. exchanges.

Risks and caveats: why caution remains warranted

A few important cautions temper the optimism around international REIT performance.

• Cyclicality and mean reversion: Asset-price gaps can close quickly but may also reverse. If U.S. REIT fundamentals strengthen or global growth slows unevenly, the performance advantage could narrow or flip back. Historical cycles show leadership rotates—2017 was the last time international REITs led, and that advantage did not last indefinitely.

• Monetary and fiscal uncertainty: A renewed bout of global inflation, surprise rate hikes, or fiscal shocks could raise financing costs and pressure high-yielding property equities. REITs commonly use leverage; abrupt changes in borrowing costs create downside risk.

• Regional political and regulatory risk: Property markets are vulnerable to local political events and rules — from zoning and planning regimes to taxation of foreign investors — which can alter investment theses quickly. Cross-border investors must stay attentive to country-specific risks.

• Currency volatility: Gains measured in a strengthening local currency can evaporate for a dollar-based investor if FX moves against them. Currency hedging reduces that risk but adds cost and complexity.

What this means for portfolio construction

The recent outperformance argues for disciplined diversification rather than a wholesale shift. Practical portfolio responses might include:

• Re-examining regional tilts within global REIT allocations to ensure investor exposures reflect both valuation and fundamental prospects.
• Considering blend strategies (active + passive) to capture local opportunities while managing liquidity and governance differences.
• Using currency hedging selectively, especially for large tactical bets into international markets.
• Stress-testing portfolios for interest-rate and FX scenarios to quantify downside risk under adverse policy moves.

Future outlook: temporary divergence or structural shift?

Forecasts vary. Some investors view the current pattern as a cyclical rebalancing that will correct as U.S. sectors reprice and as interest-rate conditions evolve. Others see structural elements — such as maturing international data-center markets, demographic-driven housing demand in Asia, and regulatory changes that broaden institutional ownership — that could sustain stronger international returns over a multi-year horizon.

Consensus among several asset managers is pragmatic: international REITs now look more attractively priced than they did a few years ago, but outperformance is not guaranteed. The path forward depends on three interlinked variables: (1) global monetary policy (especially whether rate cuts materialize and where), (2) sector dynamics (which subsectors expand earnings versus those that contract), and (3) currency trends. If rate cuts occur and international fundamentals continue to improve, the international advantage could persist; if not, the advantage may prove transient.

Bottom line

The fact that international REITs are outperforming U.S. REITs for the first time since 2017 is a significant market signal — not a market verdict. It reflects a mixture of valuation arithmetic, sectoral strengths in certain regions, shifting monetary expectations and currency effects. For investors, the event is an invitation to re-evaluate assumptions, diversify more thoughtfully across regions and sectors, and manage cross-border complexities prudently. For savers and tenants, the change has real-world consequences that will play out unevenly across countries and property types.

In markets, leadership rotates. The present “reawakening” of global listed real estate is a reminder that real-asset investing is inherently local, even when traded globally. Careful research, measured allocation changes and vigilant risk management will best serve investors who want to make the most of this moment without succumbing to the momentum of a short-lived trend.