It's been a challenging time for the real estate sector. High interest rates slowed construction and sales, hurting the residential real estate market. Office real estate has also faced challenges, as more people work remotely these days compared to the pre-pandemic era.
That's why the real estate sector shows only a 6% return over the past three years, compared to the overall S&P 500, which jumped 66% in the same period. That may be enough to turn people off real estate, but I think there are still some interesting opportunities in real estate investment trusts, or REITs.
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REITs are excellent ways to invest in real estate, as they offer instant diversification and numerous options. You can invest in a general REIT or a specific sector, such as commercial properties, healthcare, or wireless infrastructure.
However, the best part about REITs is the benefits they offer to income investors. REITs are required to return 90% of their earnings to shareholders through dividends, making them an ideal vehicle for anyone seeking a consistent income stream.
As the Federal Reserve considers cutting interest rates again, real estate is getting more attractive. These three REIT exchange-traded funds (ETFs) are already at the top of my list.
The data center REIT: DTCR
The Global X Data Center and Digital Infrastructure ETF (DTCR +1.80%) is a great way to play the rising demand for data centers and artificial intelligence (AI). Grand View Research estimates that the data center construction market will grow from $241 billion in 2024 to $456 billion by 2030, for a compound annual growth rate of 11.8%.
The DTCR ETF tracks the Solactive Data Center REITs & Digital Infrastructure index. It currently has $605.8 million in assets under management and has provided investors with a 23.4% return so far in 2025.
NASDAQ: DTCR
Key Data Points
The ETF holds 25 stocks, with the largest concentrations going to Equinix, Digital Realty Trust, American Tower, Crown Castle, and Applied Digital. Those five names make up more than 45% of the ETF's holdings.
The ETF charges an expense ratio of 0.5%, or $50 annually for each $10,000 invested. The yield is small for a REIT, at just 1.3%, but that's also a result of many of these companies buying land and infrastructure to attract hyperscalers. As data centers continue to pop up around the country, the DTCR ETF will be a name to follow.
The economical REIT: VNQ
The Vanguard Real Estate Index Fund ETF (VNQ +0.31%) tracks the MSCI US Investable Market Real Estate 25/50 index, which includes large-cap, mid-cap, and small-cap real estate stocks. This fund has $64 billion of assets under management and has provided investors with a 3.8% return so far in 2025. And it's much cheaper to hold than the DTCR ETF, as the Vanguard fund has an expense ratio of only 0.13%.
NYSEMKT: VNQ
Key Data Points
This ETF holds 153 stocks and spreads risk more effectively than the Global X Data Center fund. No name has more than 7% in weighting, and the top five stocks -- Welltower, Prologis, American Tower, Equinix, and Digital Realty -- make up just 26% of the fund.
The VNQ ETF also offers a more generous yield, paying 3.8% in dividends. While the share price has not grown much so far this year, projected interest rate cuts and falling bond yields will make funds like the VNQ ETF more attractive for investors seeking income.
The global REIT: RWO
The SPDR Dow Jones Global Real Estate ETF (RWO +0.65%) tracks the Dow Jones Global Select Real Estate Securities index, which is a cap-weighted index that includes REITs and real estate companies. The fund has $1.1 billion in assets under management, providing investors with a year-to-date return of 8.7%.
The fund is the most diversified of the three on this list, with 220 holdings. The top five names include some already mentioned here -- Welltower, Prologis, Equinix, Simon Property Group, and Realty Income, which collectively make up 28% of the fund.
NYSEMKT: RWO
Key Data Points
Nearly 30% of the fund comes from non-U.S. companies, which provides yet another form of diversification. The challenging U.S. economy has weakened the U.S. dollar this year, and investing in foreign companies can help boost returns because profits from international sources can increase when those returns are converted back to dollars.
The RWO ETF also has a fantastic dividend yield of 3.6% although the expense ratio is on the higher side at 0.5%. However, this fund does a great job of balancing diversification, yield, and international exposure while providing a better-than-average return compared to the real estate sector.
