There has been considerable debate about whether stock or real estate is a better long-term investment. Many investors believe that investing in stocks offers the best long-term return potential.
For the most part, that’s true. However, over the very long term (25 and 50 years), REITs have outperformed stocks.
Here's a closer look at how stocks and real estate investment trusts (REITs) have performed over the long term.
REIT Investing vs. Stocks: What 50 Years of Returns Data Shows
Congress established REITs in 1960 to provide all investors with access to income-producing commercial real estate that was once available only to wealthy individuals.
The National Association of Real Estate Investment Trusts (Nareit), formed that same year, has been tracking historical returns for the REIT sector since 1972. It has developed several indexes to track returns, led by the FTSE Nareit All Equity REITs Index. This index includes all 13 equity REIT subsectors (excluding mortgage REITs, which it classifies as financial companies).
Here's a look at how this index has performed over the years (total return) versus the average stock market return (measured using the S&P 500's total returns):
REITs have outperformed the S&P 500 over the past 25- and 50-year periods. Stocks have delivered higher returns in recent years, with the S&P 500 beating REITs over the previous 1-, 5-, and 10-year periods.
Dividends Account for About Half of All REIT Returns
Dividend payments are meaningful contributors to investment returns for stocks and REITs. For example, since 1940, 34% of the S&P 500's total return has come from dividends, according to Morningstar and Hartford Funds.
Ned Davis Research and Hartford Funds dug deeper into the dividends and returns data. They found that S&P 500 companies that paid a dividend outperformed nonpayers by a wide margin from 1973 through the end of 2024 (9.2% average annual total return vs. 4.3%).
They also found that companies that increased their dividends outperformed those with no change in their dividend policies (10.2% vs. 6.8%), while companies that cut or eliminated their dividends delivered poor returns (-0.9%).
Dividends Per Share
Dividends have an even greater impact on REIT returns because these entities must distribute 90% of their taxable net income to investors as dividends to remain in compliance with IRS guidelines. About half of REITs' total returns come from dividends, according to Nareit. That compares to less than one-fourth of the S&P 500’s return.
Dividend growth tends to drive higher returns. That would also help explain the REIT sector's strong long-term performance, as many REITs have strong track records of increasing dividends.
For example, three REITs qualify as Dividend Aristocrats® (the term Dividend Aristocrats® is a registered trademark of Standard & Poor's Financial Services LLC), which are S&P 500 members with at least 25 years of consecutive dividend increases. One of those REITs also qualifies as a Dividend King, a company that has had 50 or more consecutive years of dividend increases. Additionally, more than a dozen REITs qualify as Dividend Achievers, which are stocks that have delivered at least a decade of steady annual dividend growth.
Most REITs Are Less Volatile Than the Broader Stock Market
Dividend-paying stocks tend to be less volatile than the broader stock market.
One volatility metric is beta, which measures a stock's volatility compared to the S&P 500. The S&P 500's beta is 1.0. A beta of less than 1.0 means a stock is less volatile than the broader market, while a beta above 1.0 means a stock is more volatile than the S&P 500.
Beta
According to the same data from Hartford Funds and Ned Davis Research, dividend payers had a lower beta (0.94) than nonpayers (1.17). Meanwhile, dividend growers and initiators had a lower beta of 0.88, indicating they're less volatile than the average dividend payer.
Given that data, it's no surprise that most REITs have a lower beta than the S&P 500. The long-term beta of the REIT sector is 0.75. Many REITs have considerably lower betas. For example, of the 16 REITs currently in the S&P 500 with trading histories dating back to 1994, 7 had betas below 0.75, while all but 2 had betas below 1.0. Those outliers were in the timber and lodging sectors, which have more economically sensitive cash flows.
Because of their lower volatility, REIT returns are less correlated with the stock market. That makes REITs an excellent way for investors to build a diversified portfolio and improve their risk-and-return profile.
Which REIT Subgroups Have Beaten the Market Over 30 Years?
A closer look at REIT data reveals that certain subgroups outperform the S&P 500. Nareit has been tracking this data since 1994 for most property sectors (timber, infrastructure, data centers, gaming, and specialty are newer entrants to the REIT sector and thus have fewer years of tracking data).
Here's a look at how the various REIT subgroups have performed versus the S&P 500:
Self-Storage, Industrial, Residential, and Office Subsections
Self-Storage
Several major REIT subgroups have outpaced the S&P 500 since Nareit began tracking these results in 1994.
Leading the pack has been self-storage REITs, which have outperformed all other subgroups by a wide margin since 1994. Over the past three decades, they delivered an impressive 15.9% average annualized total return.
Driving the subsector's longer-term outperformance is that self-storage properties tend to have low construction and operating costs, making them profitable even at low occupancy rates. On top of that, most leases are month-to-month, enabling self-storage owners to adjust prices more quickly to reflect current market rates.
Demand has steadily increased as more households have utilized self-storage (from 3% in 1985 to 10% in 2025).
As an asset class, self-storage properties have delivered net operating income (NOI) growth much faster than traditional real estate sectors.
Industrial REITs
Another standout REIT subsector has been industrial REITs. Driving the subsector's strong results, especially more recently, has been the rise of e-commerce.
With more people shopping online, industrial REITs, especially those focused on logistics properties, have expanded rapidly by developing new distribution centers to support this growth. The robust demand for warehouse space following the pandemic has enabled REITs to capture significantly higher rental rates as leases expire and renew at current market rates. That has helped drive above-average growth for the sector. Over the past five years, logistics REITs have delivered an 11% annualized dividend growth rate, nearly double the average dividend growth rates of other REITs (6%) and the S&P 500 (5%).
Residential REITs
Residential REITs have performed well over the years. This subgroup – which includes multifamily, single-family home rental properties, and manufactured homes – benefits from fairly recession-resilient demand and rents that expand at market rates each year. One factor behind rent growth is the shortage of affordable single-family homes, which keeps more people renting.
Office REITs
Office REITs have underperformed the S&P 500 since 1994 due in part to the sector’s struggle in recent years:
This subgroup delivered the second-worst total return among REITs in 2025 (-14%) and the worst performance since 2020 (-4.1% annualized). While the sector has tried to bounce back (up 21.5% in 2024), demand for office space has remained weak since the pandemic, as many companies have adopted hybrid or remote work, reducing their need for office space. That’s having a significant impact on the office sector. Occupancy and rental rates have fallen, cutting into the cash flows of office REITs and the value of their properties.
Data Center REITs and Other Subgroups
Nareit has added several other property types to its tracking in recent years: data centers, gaming, specialty, telecommunications, and timberland. Data center REITs and specialty REITs have delivered the best total returns since Nareit started tracking these new property classes.
Why REITs Might Fit In a Balanced Portfolio
The U.S. Congress created REITs to level the playing field so all investors could access income-producing, wealth-creating real estate. That has turned out to be a boon for the average investor because REITs have outperformed stocks over the very long term – thanks partly to their dividends – and have been less volatile.
Many subsectors and specific REITs have delivered even higher returns. Given all that, investors could consider adding REITs to their portfolios by either buying individual REITs or investing in a REIT ETF.
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