Are REITs Resilient During Economic Recessions? What Recent Data Reveals

If you’ve been considering Real Estate Investment Trusts as part of your portfolio, you’ve probably wondered how they would hold up during an economic downturn. It’s a legitimate question, especially given how much real estate markets can swing when the broader economy struggles. The short answer: REITs show surprising resilience during recessions, though not without pain first. Here’s what decades of data actually tell us.

Why REITs During Recession Can Be Painful—Initially

When the economy enters a recession, REITs typically suffer significant short-term losses. Data spanning 1991 through 2024 compiled by Neuberger Berman reveals that during recessions, REITs have averaged returns of negative 17.6%. That’s a tough pill to swallow for any investor. For comparison, the S&P 500 performed even worse during those same periods, declining more than 20% on average.

However, the picture changes before recessions actually hit. Edward Pierzak, who leads research efforts at Nareit, points to a compelling pattern: in the 12 months preceding each of the last six recessions, REITs still managed positive returns, averaging 5.7%. This suggests that real estate markets often anticipate economic trouble before it fully materializes.

The Rebound Effect: Why REITs Bounce Back Faster Than You’d Expect

Here’s where the story gets interesting for long-term investors. After recessions end, REITs stage a dramatic recovery. In the 12 months following each of the last six recessions, REITs returned an impressive average of 22.7%. In fact, REITs have consistently outperformed private real estate holdings both during and after recessions, according to Nareit analysis.

The reason for this fast rebound comes down to one crucial factor: interest rates. Commercial real estate values—whether apartments, office buildings, or industrial properties—move in lockstep with interest rates through something called cap rates. These rates directly determine what investors will pay for properties. When central banks cut rates during recessions (which they almost always do), cap rates drop, driving property values up. Since REITs trade on public markets, this price adjustment happens rapidly, sometimes within weeks rather than months. Financial markets tend to price in future values rather than current ones, typically looking 12-18 months ahead, which explains why REITs can rebound so quickly.

Not All REITs Are Created Equal: The Resilience Varies by Asset Type

Not every REIT will perform the same way during economic turmoil. The type of real estate they specialize in matters enormously. Peter Zabierek, CEO and portfolio manager at Sugi Capital Management, notes that sectors like office space and hotels typically underperform during recessions. Meanwhile, data centers, cell towers, and healthcare facilities continue to generate steady returns.

A 2025 analysis by Wide Moat Research confirms this pattern: data center REITs, healthcare property REITs, and those owning triple net lease properties show the strongest recession resilience. By contrast, REITs focused on hotels, billboards, and mortgage loans tend to experience sharper declines.

Historical Performance Context: Long-Term Returns Tell a Different Story

It’s worth stepping back to see the bigger picture. From 1972 through 2024, U.S. REITs delivered an average annual return of 12.6%, according to Nareit and YCharts data. That beats the S&P 500’s 8% average return over the same 52-year span. However, over the most recent five-year period, REITs have lagged, averaging just 5.5% annually compared to the S&P 500’s 15.3%. This underperformance has led some investors to question their role in modern portfolios, but the recession data suggests that caution may be premature.

What This Means for Your Investment Strategy

Three key insights emerge from examining how REITs perform across economic cycles. First, REITs don’t decline as severely as the broader stock market during recessions, meaning they provide meaningful downside protection. Second, if you’re anticipating an economic slowdown, healthcare and data center REITs offer particularly strong resilience compared to other property types. Finally, the historical pattern shows that recessions create buying opportunities—REITs tend to rebound most powerfully from their lowest points, making them potentially attractive purchases during the darkest phases of economic downturns.

For investors building recession-resilient portfolios, REITs deserve serious consideration—not as panic hedges, but as strategic holdings that typically recover faster and stronger than broader market indices.