Real Estate Stocks Rise As Investors Ditch Tech-Focused Funds

Following weeks of sell-offs of semiconductor and big technology stocks, investors have increasingly rotated into real estate, drawn by sectors with strong fundamentals, more predictable cash flows, and assets trading at more attractive valuations.

The shift helped make real estate one of the stock market's best performing sectors during Q2 as the S&P 500 finished its strongest quarter in six years. Hospitality and retail REITs were among the biggest beneficiaries as the S&P 500 added more than $8T in value over the last three months, thanks to a strong showing in jobs and consumer sentiment.

“Investors are looking at real estate because a meaningful amount of inventory developed over the past three to four years is coming to market at prices that finally reflect reality,” said Chad McWhinney, CEO, chairman and co-founder of the Colorado-based real estate investment, development and management firm Realberry.

The rotation out of tech-focused stocks has been underway for weeks, as the broader technology sector hasn't shown the ability to hold gains, Piper Sandler Chief Market Technician Craig Johnson told Business Insider. Since hitting a peak in mid-May, the so-called Magnificent Seven of tech stocks — Alphabet, Amazon, Apple, Meta, Microsoft, Nvidia and Tesla — have fallen by more than 13%. 

Nearly 40% of real estate stocks were trading at four-week highs as of June 26, and 13% were at one-year peaks, according to data posted to X on Monday by Charles Schwab Chief Investment Strategist Liz Ann Sonders.

The real estate sector has shown long-term strength this year and solid momentum throughout June, data shared by Sonders showed. Real estate stocks rose by 2.5% in June on the way to a more than 12% gain since the beginning of 2026.

Major sporting events like the NBA Finals and FIFA World Cup drove increases for hotel and resort REITs, which have been among the biggest beneficiaries of the stock rotation. The value of the S&P 500 Hotel & Resort REITs sector has risen by roughly 40% during 2026.

Hospitality has also benefited from a sustained shift toward experience-driven spending, according to McWhinney. Ahead of the World Cup, revenue per available room rose nearly 4% in the U.S. hospitality market, as average daily rate gains outpaced inflation for the first time in several quarters, according to Cushman & Wakefield's Q1 report. 

“For investors with a long-term vision, that creates real opportunities, not to chase momentum but to acquire or develop high-quality assets at attractive entry points,” McWhinney said.

Publicly traded REITs fell much faster and farther than their privately held compatriots after 2021, though both took significant hits due to rising interest rates and economic uncertainty. Office properties declined by around 60%, while multifamily, retail and industrial prices fell by 30%-50% from their peaks before stabilization began in 2023, according to MSCI’s U.S. Capital Trends report from May.

Pricing for private industrial and retail real estate has declined by 10% or less from their peaks, while multifamily and office decreased by 15%-25%.

The current investment environment is also rewarding the consistency of retail REITs, said Lauren Ball, Westwood Financial's chief operating officer. Grocery-anchored retail developments have continued to perform through various economic cycles, and institutional investors have recognized the long-term value they create.

Average retail asking rents rose by more than 2% during Q1 due to historically low new deliveries and three straight quarters of positive net absorption, according to CBRE research. 

Simon Property Group, the world’s largest mall operator, is readying a whole slate of new projects as retail construction hits a 20-year low. The REIT has more than $1B worth of construction projects underway and another $1B worth of projects that could begin construction this year.

The industrial sector also made a lot of progress during the first quarter, as Cushman & Wakefield’s marketbeat report showed leasing increased by nearly 18% year-over-year. 

Capital is flowing toward sectors with strong fundamentals, and Ball said necessity-based retail stands out because it's supported by strong leasing activity, healthy occupancy and retailers that serve the everyday needs of consumers.

"There is significant capital pursuing retail today, but the supply of high-quality assets remains limited,” Ball said. “That imbalance continues to create a highly competitive acquisition environment."

As more capital enters the sector, that competition will intensify and drive down cap rates.

Stock gains were also likely spurred by a stronger-than-expected U.S. jobs report in May that indicated an improving economy.

The S&P 500 Real Estate Index Sector gained 3.9% last week, while the Real Estate Select Sector SPDR Fund rose more than 3.1% to $45.24. The Dow Jones Equity REIT Total Return Index increased 4.2% for the week that ended June 26, and the FTSE Nareit All Equity REITs index improved by nearly 4.2%.

However, the sector’s momentum should not be interpreted as a broad recovery across all commercial real estate. The recovery is asset-specific, market-specific and execution-specific, McWhinney said.  

Investors recognize those different recovery rates and have placed a greater emphasis on asset quality, tenant mix, market fundamentals and long-term performance, Ball said.

Sectors such as industrial, residential and mixed-use are improving, but office will continue to be a different conversation for some time. McWhinney said the changes indicate a market reset entering its next phase rather than a recovery for the broader sector.

“Mixed-use development is a good example of where we see real consumer demand,” McWhinney said. “When you bring together residential, hospitality, retail and community in a single place, a place people actually want to be … you're creating something with lasting value.”

By combining those improving asset classes, mixed-use developments offer investors exposure to sectors where supply-and-demand fundamentals remain durable. McWhinney said Realberry is focused on markets with strong population growth and job creation because disciplined execution and long-term vision are what create lasting value.

CRE’s recovery won’t be driven by sentiment or stock prices, he said. Investors are tracking supply, demand, location and asset quality. 

“Markets with population growth and job creation will outperform,” McWhinney said. “Well-capitalized sponsors with integrated platforms and operating expertise will outperform.”