Published on June 3, 2026 (1–9 minute read)

Following the end of REIT earnings season, CenterSquare portfolio managers around the globe give their take on the highlights in this two-part series. In this installment, our U.S. team shares their thoughts on the macro environment and across sectors, covering industrial and hotel demand, consumer spending and more.

1.  We’re emerging out of earnings season and you just spent some time meeting with management teams at a REIT conference – big picture, how would you describe the sentiment in the equity markets for REITs, given all the uncertainty in the market driven by geopolitics, elevated energy prices, stagflationary pressures, etc.?

The overarching tone coming out of this conference was better than the macro headlines would suggest, but with deliberate conservatism exercised by management teams. The uncertainty isn't being dismissed — it's being actively priced into guidance decisions. Management teams continue to be surprised by the resilience of the U.S. consumer in the face of higher inflation – and more specifically, energy prices. The corresponding rise of interest rates more recently has been an area where REITs have had to add a layer of conservatism into their guidance. Fortunately, the vast majority of REITs have gotten ahead of this, and near-term refinancings are quite limited.

Geopolitical tensions were widely expected to remain for quite some time going forward, and as a result, REIT management teams have been focusing on controlling what they can: tightening up the balance sheet, maintaining capital flexibility, working to cut operating costs through greater productivity via AI integration and blocking and tackling on the ground to maintain occupancy.

2.  The reality in which we’re operating today continues to show a lot of dispersion between the haves and have-nots – as you look at some of the sectors that would be indicative of the sentiment across businesses – office, industrial, data centers, even billboards – what did you hear from the REITs related to how companies are thinking about the current environment?

Almost all property sectors continue to enjoy healthy and/or recovering fundamentals. Within office, REIT landlords are seeing some of the strongest year-to-date leasing since the pre-COVID years. AI has been an incremental driver of demand, with office markets in San Francisco and New York City being the two biggest beneficiaries. For the Industrial sector, leasing velocity has begun to recover in recent months after many tenants spent last year on the sidelines as the tariff saga unfolded. This indicates that demand is healthy enough across US corporates that they can no longer defer decisions, or they become desensitized to the macro noise and have to move forward with their business plans. Ironically, the best performing and tightest segment of the industrial sector right now is within large-format (>500ksf) properties, which are typically where a tenant needs the greatest amount of forward visibility and will commit the most capital to occupy. So the industrial signals point to reasonable optimism. Finally, within the hotel and lodging sector, where the sentiment on the outlook of the economy can be seen most in real-time, we see healthy and improving large group demand and stable to modestly improving business transient demand. On the flip side, we continue to see soft demand in the economy and in value hotel chains where the pinch of inflation has hit household budgets most acutely.

3. The consumer is being impacted by a slower labor market and elevated inflation eating into spending budgets. Given how much of the US GDP is dependent on consumer spending, we’re always looking at things that could be impacting the health of the consumer. One of the big questions on investors’ minds has been around the strength of the labor market – job growth is a big driver of demand for rental housing – whether it’s multifamily or single-family rental properties – what did you hear from the rental housing REITs during earnings season this quarter and what does it tell you about the strength of the underlying consumer?

The macro narrative around the consumer is more pessimistic than what the rental housing REITs are printing, and fundamentals are inflecting positively, as is seasonally normal. The clearest signal from the quarter was the bifurcation between the coasts and the Sunbelt.

Coastal urban markets (San Francisco, the broader Bay Area, New York) are the haves: blended lease growth has moved into the high single digits in the strongest submarkets, concessions in downtown SF are effectively gone, and occupancy is holding above 97%. The Sunbelt is the watch story, not the weak story. The best Sunbelt markets (Atlanta, Dallas, Raleigh, Nashville) are showing real green shoots as concessions lessen and new supply slows (deliveries in most apartment markets are down 30-50% from peak with further reductions through 2027), but a handful of Texas markets and Nashville saw momentum retreat over the past 30-45 days, resulting in uneven recovery.

Consumer data points to a still-healthy renter rather than a stressed one. Rent-to-income ratios across the apartment group sit at or below long-run averages (roughly 19-21% on average), bad debt is structurally improving and at or below pre-COVID levels at most names, and move-outs to buy remain low because the for-sale housing market is still effectively frozen. Single-family rental is similarly constructive, with occupancy in the high 90s, retention near 80%, and concessions decreasing.

4.  Even more than rental housing, which is a necessity at the end of the day, the hotel sector is exposed to much more discretionary spending from the consumer. What did you hear from the hotel REITs and what is that telling you about discretionary consumption?

Hotel REITs had a much better quarter than the macro tape would suggest. Virtually every hotel REIT we cover beat and raised, and the cadence within the quarter accelerated meaningfully. January was the soft month across the board, up against tough wildfire and inauguration-related comps, February tracked, March accelerated, and April preliminary numbers point to RevPAR growth of +4% or better at multiple names. The discretionary consumer is not just showing up, they're trading up. Luxury and resort led the quarter, with resort RevPAR running in the high single to low double digits across the group, and the highest-ADR hotels (those above $300/night) outperforming the rest of the portfolio by several hundred basis points of RevPAR and a multiple of that in EBITDA growth.

The more interesting development was business transient (BT) finally inflecting after several years of being the missing leg of the recovery. Group is also strong, with room nights on the books for 2026 pacing well, and corporate lead volumes well above 2019 levels. The read-through on discretionary consumption is that the high-end consumer is firmly intact, and the mid-tier consumer is starting to follow rather than retrench. The risks management consistently flagged were geopolitics and airline ticket inflation (domestic airfare up 10-20%), not gas prices or domestic leisure demand. Guidance could ultimately prove conservative if the BT recovery continues and World Cup / America 250 demand materializes as expected, and it is worth remembering that the SF urban recovery still has years to run with occupancy in 2026 well below 2019 levels and no new supply expected for 5-10 years.

5.  AI and the opportunity or disruption associated with it is clearly top of mind for investors – what are the major implications of AI you’re thinking about across the REIT market?

AI is showing up in the REIT numbers in three distinct ways, and the second-order effects are more interesting than the first-order data center story. First-order is well-understood: picks-and-shovels demand for data center capacity. The more interesting real-time read-through from this quarter was second-order: AI is now a meaningful demand driver for asset classes nobody had previously connected to AI. The clearest example is the San Francisco recovery, which management across both apartments and hotels explicitly linked to AI/robotics company formation, AI-driven office leasing and net absorption, elevated VC investment in the Bay Area, and steady top-tier tech job postings through the layoff headlines. The implication is that AI is creating a concentrated demand pulse in a handful of submarkets (downtown SF, Bay Area office, Bay Area apartments, Bay Area hotels), and that pulse is now flowing through to multiple REIT P&Ls simultaneously.

Second, AI is starting to show up as an operating expense lever for the REITs themselves: wage growth in the hotel sector was held to under 1% at one of the larger operators in part through AI-driven productivity gains in housekeeping and F&B; bad debt at one apartment owner fell more than 40% year-over-year through AI-based resident screening; one of the major global hotel brands has built its native AI booking agent on Anthropic's Claude; independent hotel operators are adding AI-readable pages to their websites for agent discoverability and signing agreements for AI-powered call handling and guest requests.

Third, and the part to watch over the next 12-18 months, is the disruption side. So far, AI-related white-collar job destruction is not showing up in office leasing, corporate group room nights, or business transient demand. If anything, those data points are accelerating. The risk worth watching is whether the corporate productivity bull case eventually pulls real headcount out of the office tenant base, which would have knock-on effects on residential and consumer demand more broadly. For now, AI looks like a net positive across the REIT market, particularly in residential and lodging exposed to tech-heavy markets, but it's still early days.

6.  Are there any major inflection points that you’re seeing unfold across fundamentals for any sectors?

Industrial:  Data Center-Adjacent demand is officially a new demand layer

This is arguably the most significant fundamental inflection across the entire REIT landscape right now. A recent Newmark study estimated that 500k sf of industrial space is needed per 1msf of data center development. REIT management teams across the sector reported signing leases with HVAC manufacturers, commercial plumbing companies, fiber optic installers, and similar tenants in proximity to current data center development sites.

The new constraint for future data center development is politics, not power

There is a genuine regime change underway, and it has profound implications for the duration of the data center supply shortage we’re experiencing. Power was a constraint that the industry understood how to solve — site generation, utility partnerships, nuclear offtakes, BYOP mandates. It was a solvable engineering and procurement problem. Community and political resistance is fundamentally different in character. It's slower, less predictable, more geographically variable, and not solvable with capital alone. The industry will be addressing the public narrative challenges to building data centers for years to come.

Apartments: The supply rollover may finally be materializing

After over two years waiting for an inflection, the absorption of heightened multifamily supply appears to be hitting a place of bottoming. Given the timeline of construction to build new units and the difficulty in permitting, the outlook today shows a very meaningful drop in apartment supply that should persist for at least the next two years. New tenant demand remains a bit of a question mark, but the bottoming of fundamentals appears to be behind us as it relates to supply-driven weakness in fundamentals. This inflection could ultimately be quite meaningful if we see any sort of improvement in employment data going forward. Heretofore, the absorption of heightened supply over the last two years has been completed amidst very paltry job growth, so any improvement on the employment front would accelerate improvements in fundamentals as supply continues to dissipate.

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