There has been considerable debate about whether stocks or real estate is a better long-term investment. Many investors believe that investing in stocks offers the best return potential over the long term.
However, the historical data says otherwise.
Here's a closer look at how stocks and real estate investment trusts (REITs) have performed over the long term.
REITs vs. stocks: Digging into the historical data
Congress established REITs in 1960 to provide all investors access to income-producing commercial real estate that was once only available to wealthy individuals.
The National Association of Real Estate Investment Trusts (Nareit), which formed that same year, has been keeping track of historical return data 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 contains all 13 equity REIT subsectors (it excludes mortgage REITs, which it classifies as financial companies).
Here's a look at how this index has performed over the years versus the average stock market return (measured using the S&P 500's returns):
TIME PERIOD | S&P 500 (ANNUALIZED RETURN) | FTSE NAREIT ALL EQUITY REITS (TOTAL ANNUAL RETURN) |
|---|---|---|
1972-2024 | 8.0% | 12.6% |
Past 40 years | 9.1% | 11.4% |
Past 30 years | 8.5% | 11.4% |
Past 25 years | 6.2% | 11.7% |
Past 20 years | 8.3% | 9.0% |
Past 10 years | 11.1% | 7.2% |
Past 5 years | 15.3% | 5.5% |
Past year (2024) | 23.2% | 4.9% |
Year-to-date (Through September 2025) | 13.7% | 4.5% |
REITs have outperformed the S&P 500 over the past 20-, 25-, 30-, 40-, and 52-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.
However, the overall data shows that REITs have outperformed stocks over the long term.
Dividends drive much of 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 dividend income, according to data from 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 discovered that companies that increased their dividends performed better than 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 bigger impact on REIT returns because these entities must distribute 90% of their taxable net income via dividends to investors to remain in compliance with IRS guidelines. About half of REITs' total returns come from dividends, according to Nareit. That compares to about a quarter 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 a strong track record 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.
REITs and volatility
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 the S&P 500 and nonpayers (1.17). Meanwhile, dividend growers and initiators had an even lower beta, at 0.88, meaning they're less volatile than the average dividend payers.
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 of less than 1.0. Those outliers were in the timber and lodging sectors, which have more economically sensitive cash flows.
For example, Realty Income (O -1.07%) had a beta of 0.5. A beta of 0.5 implies this REIT is half as volatile as the S&P 500, so if the S&P 500 slumps 10%, this REIT should only decline in value by 5%.
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 done the best at outperforming stocks?
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:
REIT SUBGROUP | AVERAGE ANNUAL TOTAL RETURN (1994-2024) |
|---|---|
Self-Storage | 16.7% |
Industrial | 13.3% |
Residential | 12.7% |
Healthcare | 12.0% |
Retail | 11.3% |
Office | 10.5% |
Lodging/Resorts | 8.6% |
Diversified | 7.3% |
S&P 500 | 8.5% |
Self-storage REIT performance vs. the S&P 500
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 16.7% 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 most properties profitable 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 utilize self-storage (from 6.8% in 2003 to 10.2% in 2024).
As an asset class, self-storage properties have delivered much faster net operating income (NOI) growth compared to traditional real estate sectors.
Industrial REIT performance vs. the S&P 500
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, more than double the average of other REITs (6%) and the S&P 500 (5%).
Residential REIT performance vs. the S&P 500
Residential REITs have also 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 lack of affordable single-family homes, which causes more people to continue renting.
Office REIT performance vs. the S&P 500
Office REITs have exceeded the S&P 500’s performance since 1994. However, the sector has struggled in recent years:
Time Period | Office REITs | S&P 500 |
|---|---|---|
Past 10 years | 4.6% | 11.1% |
Past 5 years | -10.5% | 15.3% |
Past 3 years | -4.7% | 7.3% |
Past year (2024) | 21.5% | 23.2% |
Year-to-date (Through September 2025) | -1.0% | 13.7% |
This subgroup delivered the worst total return among REITs in 2022 (-37.6%) and the second-worst performance in 2023 (2%). While the sector bounced back in 2024 (21.5%), it took another step back through the third quarter of 2025 (-1.0%). Demand for office space has been weak since the pandemic because many companies have adopted hybrid or remote work, lessening 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.
However, office REITs had a stronger 2024, delivering the fourth-best performance among REIT subgroups, as more companies required their employees to return to the office full-time, boosting demand, occupancy, and rental rates. While those trends continued in 2025, elevated interest rates and debt levels across the sector have weighed on the values of office REITs.
Data center REITs and other subgroups vs. the S&P 500
Nareit has added several other property types to its tracking in recent years. Here's how these newer subsectors have performed versus stocks since their inception:
REIT SUBGROUP | FIRST YEAR TRACKED | TOTAL AVERAGE ANNUAL RETURN | S&P 500 (ANNUALIZED RETURN) |
|---|---|---|---|
Timberland | 2011 | 8.1% | 11.7% |
Telecommunications | 2012 | 11.6% | 12.6% |
Data Centers | 2015 | 16.0% | 11.1% |
Specialty | 2015 | 14.6% | 11.1% |
Gaming | 2023 | 1.4% | 23.7% |
Another headliner for long-term outperformance has been Realty Income. The retail REIT, which focuses on owning freestanding net-lease properties, has produced a 13.7% compound average annual total return since its public listing on the New York Stock Exchange in 1994.
The REIT's steadily rising dividend is one factor contributing to those market-crushing total annualized returns. Realty Income -- which pays a monthly dividend -- has increased its payout for 112 straight quarters as of late 2025 and 132 times overall, giving it three decades of annual dividend growth. Realty Income has grown its dividend at a 4.2% compound annual rate since 1994.
The data on REITs is clear
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 long term -- thanks partly to their dividends -- and with less volatility.
Many subsectors and specific REITs have delivered even higher returns. Because of all that, investors should strongly consider adding REITs to their portfolios by either purchasing shares of individual REITs or investing in a REIT ETF.
How to invest in REITs
Sources
- Equity LifeStyle (2025). “Company Presentation, September 2025.”
- Extra Space Storage (2025). "Company Presentation, September 2025."
- Hartford Funds (2025). “Power of Dividends.”
- Nareit (2022). "REITs and Dividend Income."
- Nareit (2025) “Annual Index Values & Returns.”
- Realty Income (2025). "Investor Presentation, February 2025."
- REIT.com (2018). “REIT Beta by Property Type: Most REIT Sectors Have Brought Down Portfolio Volatility Most of the Time.”
- Nareit (2025). “Investment Performance by Property Sector and Subsector.”
- S&P Global (2025). “S&P 500® Dividend Aristocrats®: The Importance of Stable Dividend Income.”
- Prologis (2025). "Fact Sheet."
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