Citi Experts Believe Demand, Better Fundamentals Will Spur REIT Growth in 2026

The national real estate investment trust (REIT) sector is expected to go through major changes in 2026, with more mergers and acquisitions on the horizon, demand for data centers to continue unabated, and industrial assets to experience a long-awaited upward pressure on rents, even as the multifamily sector is at risk from poor U.S. jobs numbers. 

These were just some of the conclusions made during Citibank’s Global Property CEO Conference, which saw some of the firm’s top commercial real estate experts hold court on the $4.5 trillion marketplace of U.S. REITs and nearly every major asset class. 

Nick Joseph, managing director and head of the real estate and lodging team at Citi, said 2025 witnessed a reversal of the recent trend of REITs underperforming public markets, especially as cash-flow growth, lower supply, and steady demand created building blocks for strong stock performance. 

Joseph added that an internal survey of dozens of REIT CEOs found that 52 percent expected fewer public REIT companies a year from now due to an uptick of merger and acquisition activity in 2026. 

“Those comments would lead us to believe that the broader M&A environment should remain more active over the next year, which we agree with,” Joseph said. 

CO reported earlier this year that since 2022, when interest rates began to climb, 41 public REITs have been sold to private equity firms, merged into other public companies or liquidated, with mortgage REITs in particular being absorbed by other entities. 

Mike Rollings, Citi’s managing director and communications services and communications infrastructure analyst, spoke to the fast-growing data center space, which saw $61 billion of new investment capital flowing into the asset class in 2025, which is just ahead of the $60.8 billion that entered it in 2024. 

Rollings said demand indicators on data centers are positive due to supply restraints, which largely stem from a lack of available locations that can source the energy and power required for data center operations, as well as zoning pushback by localities and a downturn in the 2025 construction cycle. 

“It’s limited the pace of which supply is coming into the market on an annual basis,” he said. 

Rollings pointed to REITs such as Digital Realty and Equinix, as well as SBA Communications (SBAC), the top provider of wireless communications and cell towers nationally, which he said are primed for income growth and healthier balance sheets after increased consolidation in their respective sectors and a more favorable rate environment. 

“This is a year where we do think there should be forward progress on setting the stage to improve growth,” he said. 

Eric Wolfe, a director and analyst covering residential and storage, said the multifamily and residential sectors have experienced negative headwinds in 2026, with those stocks trading the cheapest they have recently, mainly due to weak demand over the last six to nine months. 

Wolfe cited declines in job growth since the Trump administration instituted its “Liberation Day” tariff policy in April 2025, and the way rents decelerated in the third and fourth quarters last year. 

He added that rent growth has now fallen into the low single digits, roughly 1.5 percent to 2 percent for the sector, fueled mainly by “a relatively weak demand environment in terms of rents,” a phenomenon he said was tied to a poor economy, 

CO reported on March 6 that U.S. employers cut 92,000 jobs last month, causing the unemployment rate to reach 4.4 percent, up from 4.3 percent in January, according to the Bureau of Labor Statistics.

“For things to improve, going forward, the job market really needs to start picking up for apartments and SFRs [single-family rentals],” said Wolfe. 

Craig Mailman, a director and analyst who covers retail and industrial for Citi, broke down the state of those two sectors. He noted that industrial REITs have lagged in recent years, as new supply has placed downward pressure on rents, especially in Southern California. But things have improved since a 2022 peak, when 7 percent of all new U.S. CRE supply was industrial. Today, the sector is closer to its historical average of 2.8 percent of all new supply, which has alleviated much of that downward pressure. 

Now industrial is seeing broad demand, especially from nearshoring and onshoring investments, third-party logistics providers and e-commerce players, making 2026 a comeback year for industry, primarily around rent growth.  

“This is the year net absorption should improve, national market vacancy should take lower, setting up 2027 for market rents to rise,” he said.  

As for retail, Mailman noted that the fundamentals of the asset class have been consistently good for REITs due to a lack of new supply over the last 15 years.  

“If anything, obsolescence and repurposing is actually taking stock out,” he said. “And retailers continue to expand their physical presence. The availability of high-quality space continues to be limited.”  

Brian Pascus can be reached at bpascus@commercialobserver.com.