Data Centers Are the Hot New REITs. Should You Invest $1,000?

Real property concern trusts (REITs) person staged a comeback successful 2026 aft years of declining oregon moving sideways. And 1 class of REITs, information centers, is peculiarly blistery close now.

But first, what are these investments, and however bash they work? REITs are companies that concern oregon own, and often besides manage, income-producing existent estate. The properties they ain tin alteration widely, from bureau and retail properties and residential existent property to healthcare and information halfway assets, among galore different categories.

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Yet the full REIT assemblage struggled successful the aftermath of the COVID-19 pandemic owed to trends specified arsenic work-from-home civilization and depressed spending astatine brick-and-mortar retail outlets. Plus, the Federal Reserve's elevated involvement rates, implemented aft the pandemic to antagonistic rising inflation, wounded REITs, galore of which trust heavy connected indebtedness to expand.

But REITs person staged a comeback successful 2026, arsenic those post-COVID trends person waned and involvement rates person stabilized. The full REIT assemblage is up much than 10% twelvemonth to date, arsenic measured by the Vanguard Real Estate Fund ETF (NYSEMKT: VNQ). That's astir the aforesaid arsenic the broader marketplace -- the S&P 500 is up 10.5% truthful acold this year. In fact, REITs were the best-performing plus people successful June.

Yet a fewer circumstantial REIT categories are doing acold better, with returns that person wildly outpaced this year's returns. Among them is simply a comparative newcomer to the REIT space: information centers. The year-to-date instrumentality for information halfway REITs was 33.2% arsenic of June 30, according to the National Association of Real Estate Investment Trusts. That's been driven by bonzer maturation successful the sector, peculiarly from AI companies and rising information usage.

Two well-known information halfway REITs, Equinix (NASDAQ: EQIX) and Digital Realty Trust (NYSE: DLR), are up 34% and 14%, respectively, twelvemonth to date.

A caller entrant to information halfway REITs

And there's a caller entrant to the space: Realty Income (NYSE: O). Realty Income precocious declared its 673rd consecutive monthly dividend. The REIT has accrued its dividend 135 times since it went nationalist successful 1994. Its dividend output is simply a hefty 5.08%.

Realty Income's portfolio of properties spans the retail, industrial, and gaming sectors. But present it's getting deeper into information centers. The institution precocious announced a $6 cardinal associated task with Cloud Capital that volition put successful a diversified portfolio of stabilized hyperscale assets leased to investment-grade tenants nether long-duration, triple nett leases (a commercialized lease statement successful which the tenant agrees to wage each spot operating expenses, similar taxes and insurance, successful summation to rent).