U.S. Industrial REITs: The Recovery Moves Upfield

Research evidence excerpt

U.S. Industrial REITs: The Recovery Moves Upfield

finding a footing. In our view, the debate is no longer +1-212-713 4386

whether fundamentals have troughed, but how quickly improving market conditions

can translate into stronger rent growth and renewed pricing power.

We believe investors largely recognize that Industrial fundamentals have bottomed and

that the sector is transitioning toward recovery. As a result, the debate has shifted from

whether an inflection is occurring to the speed and magnitude of the recovery. After

leading the REIT universe in 2025, the group has lagged somewhat YTD in 2026,

generating total returns of 12% versus 18% for the broader REIT index. In our view, this

relative underperformance reflects a market that is waiting for clearer evidence that

improving demand and moderating supply are translating into accelerating rent growth

and earnings momentum. Given the strong gains already realized over the past 18

months, we believe meaningful multiple expansion will likely require evidence that the

recovery is progressing faster than currently anticipated. That said, we continue to see a

path to upside if improving fundamentals begin to drive upward earnings revisions, even

if valuation multiples remain largely unchanged. Ultimately, should 2Q'26 results show

strengthening leasing demand, improving spreads, or early signs of renewed pricing

power, we would expect investor conviction in the recovery narrative to increase,

creating scope for both estimate revisions and further re-rating.

CoStar data for 2Q'26 showed healthy absorption and stabilizing vacancy

We believe the most recent CoStar data supports the supply/demand inflection

narrative.

Net absorption in 2Q'26 improved meaningfully yr/yr. Net absorption