REIT ETFs Riding High on AI Boom: The Overlooked Way to Play

Real Estate Investment Trusts (REITs) that own, operate, or finance income-generating real estate across various property types — from data centers to warehouses to self-storage facilities- have been performing remarkably well of late. The Dow Jones U.S. Select REIT Index has gained approximately 12.3% year to date, outperforming the Dow Jones Industrial Average, which has returned 8.7% over the same period.

By extension, exchange-traded funds (ETFs) holding these real estate assets have also experienced a notable resurgence in recent times, offering investors a combination of steady dividend yields and capital appreciation. This outperformance stems largely from one powerful catalyst — artificial intelligence (AI). 

To understand how AI is quietly transforming REITs, one must analyze how industry-wide digital growth is enabling physical infrastructure expansion and, on that front, why ETFs offer a prudent way to capture this trend — revealing an often-overlooked corner of the AI investment landscape.

The AI-REIT Connection

The most direct link between AI and REITs runs through data centers. While chipmakers and software providers dominate public AI narratives, the underlying AI ecosystem requires massive physical footprint expansions — ranging from specialized server facilities to logistics hubs and healthcare facilities.

That’s where data center REITs come in — they are essentially landlords that build, own and lease space to tenants including Amazon, Apple, Oracle and Nvidia.

For instance, Equinix EQIX, the world’s largest data center REIT, has gained 36.4% year to date, outperforming megacap technology stocks and boosting its market capitalization to $100 billion (as cited in CNBC). The company has been capitalizing on the AI boom by carving out a specialized niche in enterprise AI inference and distributed data center infrastructure. 

The company has recently inked a deal with Nvidia that gives customers a flexible way to run their AI models on open-source cloud platform Together AI. 

Then there’s Digital Realty Trust DLR, which owns more than 300 data centers across 30-plus countries. The stock is up over 22% so far this year and carries a $16.5 billion active development pipeline representing a 60% year-on-year increase heavily fueled by the accelerating global demand for AI-ready infrastructure, hyperscale clouds and enterprise data management. It recently acquired interests in three hyperscale data centers in Northern Virginia, the nation’s largest data center market.

There’s also Welltower WELL, a healthcare REIT, with year-to-date return of 27%, has been leveraging AI in its business systems to improve its operations significantly. As AI-driven medical advances enable the early detection of diseases in the aging population, timely treatment can extend lives. As more people live longer, demand for senior housing is likely to increase, thereby supporting growth in stocks such as WELL.

REIT ETFs: The Unsung Beneficiaries of AI

Despite this fundamental tailwind, real estate is often overlooked as a primary AI play. 

Most investors focus on chipmakers like Nvidia or cloud providers like Microsoft, but data center REITs capture AI infrastructure demand through long-term leases with locked-in rental escalations. 

According to data from the National Association of Real Estate Investment Trusts (Nareit), data center REITs account for approximately 13% of the total U.S. REIT market capitalization, which sits around $1.5 trillion. 

Meanwhile, a counterintuitive tailwind is also emerging: community pushback against data center construction. A recent NBC News poll found that 69% of respondents oppose AI data centers in their area. But for existing data center REITs, this is actually positive — restricting new supply makes current capacity more valuable and gives landlords greater pricing power.

In this environment, REIT ETFs offer diversified exposure to this trend without the concentration risk of betting on a single data center operator. They also provide dividend income — typically yielding 2% to 3% — while participating in AI-driven growth.

REIT ETFs Worth Watching

Considering the aforementioned discussion, investors may want to keep the following REIT ETFs on their watchlist:

iShares Residential and Multisector Real Estate ETF REZ

This fund, with net assets worth $824.5million, offers exposure to U.S. residential, healthcare, and self-storage real estate equities. WELL holds the first spot in this fund, with 25.3% weightage. 

REZ has rallied 11.4% year to date and charges 48 basis points (bps) in fees. 

First Trust S&P REIT ETF FRI

This fund, with net assets worth $194.9 million, seeks investment results corresponding to the price and yield of the S&P United States REIT Index. WELL holds the first spot in this fund with 12.6% weightage, while DLR holds the third spot with 4.59% weightage. EQIX holds the fourth position in this fund with 4.59% weightage. 

FRI has risen 13% year to date and charges 50 bps in fees. 

iShares Core U.S. REIT ETF USRT

This fund, with net assets worth $4.44 billion, provides exposure to U.S. real estate equities. WELL holds the first spot in this fund with 9.2% weightage, while EQIX holds the third spot with 6.30% weightage. DLR holds the fourth position in this fund with 4.43% weightage. 

USRT has gained 13.2% year to date and charges 8 bps in fees. 


 

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