AEW Points to Senior Housing, Data Centers, and Retail as Top REIT Performers in Current Climate

Real estate investment trusts appear poised for a growth phase as market conditions align in their favor, according to recent analysis from AEW portfolio manager Gina Szymanski. The combination of disciplined new construction and an evolving interest rate landscape has created what many institutional investors view as an increasingly attractive entry point for the asset class.

Speaking about the current state of REITs, Szymanski emphasized that the sector benefits from a supply-demand dynamic that should support occupancy gains and rental rate growth across multiple property types. After years of elevated development activity in certain sectors, the pullback in new construction starts has set the stage for landlords to regain pricing power.

Key Details

AEW has identified three specific sectors where fundamentals appear strongest: senior housing, data centers, and retail real estate.

Senior housing stands out as a compelling opportunity driven by demographic tailwinds and limited new inventory. The aging U.S. population continues to create sustained demand, while development pipelines remain constrained following pandemic-related disruptions to construction financing and timelines.

Data centers continue to benefit from structural demand drivers, including cloud computing expansion and artificial intelligence infrastructure requirements. The sector's growth trajectory appears supported by enterprise digital transformation trends that show no signs of slowing.

Perhaps more surprisingly, retail REITs have emerged as a favored sector. After years of bearish sentiment surrounding brick-and-mortar retail, the asset class has demonstrated remarkable resilience. Limited new retail construction over the past decade has tightened supply in quality locations, while consumer spending has remained robust.

Market Impact

For commercial real estate professionals, AEW's sector preferences signal where institutional capital may flow in the coming quarters. The emphasis on senior housing reflects growing confidence that demographic-driven demand will finally materialize as the baby boomer cohort continues aging into the target demographic for these properties.

The bullish stance on retail REITs suggests that the narrative around physical retail's demise was overstated. Brokers and investors should note that well-located, experiential retail properties may command premium valuations as institutional buyers rotate into the sector.

Additionally, the focus on supply dynamics underscores a broader theme: disciplined development benefits existing owners. Markets and property types where construction activity remained restrained during the low-rate era now offer stronger fundamentals than those where overbuilding occurred.

According to REIT.com, Szymanski's comments reflect growing optimism among institutional managers that REITs are positioned to outperform following a challenging period of rising rates and valuation compression.

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Sector Preference Is Not a Buy List

Supply constraints can support existing owners, but individual REITs still differ in leverage, lease maturity, development exposure, operator quality, and valuation. Senior housing adds operating and labor risk; data centers depend on power and customer concentration; retail performance varies widely by tenant mix and trade area.

Investors should therefore compare AEW's sector thesis with company-level cash flow and balance sheets. The view becomes more persuasive if rent growth, occupancy, development yields, and funding costs improve together. A favorable property type cannot compensate indefinitely for an overleveraged capital structure or assets in weak local markets.