Three REIT ETF Options Poised for Growth in 2026

Understanding Why REIT ETFs May Be Positioned for Success

Real estate investment trusts have long served investors seeking consistent income streams. These entities acquire properties, lease them to tenants, and distribute at least 90% of their taxable earnings as dividends — a regulatory requirement that makes them attractive to income-focused portfolios.

The 2022-2023 period proved challenging for the REIT sector. Rising interest rates increased financing costs for property acquisitions and created headwinds for operators. Simultaneously, elevated Treasury yields and CD rates diverted capital away from dividend-paying real estate securities toward fixed-income alternatives.

Recent developments suggest a turning point. During 2024 and 2025, the Federal Reserve implemented five rate cuts, triggering stabilization across many REIT segments. Yet Treasury yields have remained elevated due to persistent inflation concerns, fiscal deficit spending, and recession fears. This dynamic kept investors anchored to bonds, preventing certain REIT categories — particularly office, retail, data center, and industrial properties — from experiencing meaningful appreciation.

As Treasury yields normalize over the coming year, capital flows should redirect back toward income-generating equities and REIT ETFs. For investors wanting diversified exposure without picking individual securities, exchange-traded funds offer an efficient entry point. Here are three compelling REIT ETF choices worth considering.

VNQ: The Comprehensive, Income-Focused Approach

Vanguard Real Estate Index Fund ETF (VNQ) dominates the REIT ETF space by assets. This fund maintains exposure to 153 securities spanning 17 distinct property categories. Healthcare properties represent 15% of holdings, retail makes up 13.5%, and industrial facilities account for 11.3%. The fund also allocates capital to telecom towers, data centers, and ancillary real estate services.

Notably, VNQ’s largest position is an institutional mutual fund — Vanguard Real Estate II Index Fund Institutional Plus Shares — representing 14.5% of assets. Top equity holdings include Welltower (6.8%), Prologis (6.7%), and American Tower (4.8%).

The fund’s emphasis on large-capitalization REITs creates a balanced profile suitable for retirement portfolios. With an effective yield of 3.62% (unadjusted) and 2.83% (adjusted, excluding return-of-capital distributions), VNQ delivers meaningful income. Its $1 minimum investment and 0.13% expense ratio create minimal friction for entry, making it accessible for most investors establishing REIT exposure.

SCHH: Pure-Play REIT Concentration

Schwab U.S. REIT ETF (SCHH) tracks the Dow Jones Equity All REIT Capped Index with 124 holdings. Its largest positions overlap with VNQ — Welltower (9.9%), Prologis (8.5%), and American Tower (4.9%) — though SCHH’s concentrated structure emphasizes property-owning REITs exclusively.

Unlike VNQ, SCHH excludes non-REIT real estate companies and mortgage REITs (mREITs), which hold mortgage securities and derivatives. This specialization appeals to investors prioritizing direct property exposure over mortgage-backed instruments.

The fund generates a 3.6% SEC yield with zero minimum investment and charges merely 0.07% annually. For investors comfortable with traditional property-focused portfolios and seeking lower expenses, SCHH presents a straightforward vehicle.

XLRE: Growth-Oriented Real Estate Exposure

Real Estate Select Sector SPDR Fund (XLRE) pursues a different mandate by weighting data center, logistics, and communication tower REITs — sectors positioned to capture secular trends in cloud computing, artificial intelligence deployment, and e-commerce expansion.

With just 31 holdings, XLRE maintains concentrated exposure while preserving diversification. Top positions again feature Welltower (11.1%), Prologis (9.6%), and American Tower (7.1%). Beyond pure REITs, XLRE includes other real estate companies seeking “effective representation” of the S&P 500’s property sector.

This approach carries moderately elevated volatility relative to broader REIT funds, yet it provides superior growth potential for investors balancing yield with capital appreciation. XLRE distributes a 3.48% yield, charges 0.08% annually, and maintains no investment minimums.

Selecting Your REIT ETF Strategy

Each fund addresses different investor profiles. VNQ suits conservative investors prioritizing income stability and comprehensive sector representation. SCHH appeals to those wanting pure property REITs without mortgage derivatives. XLRE fits growth-conscious investors betting on secular tailwinds from technological transformation and digital commerce.

As macro conditions shift and Treasury yields gravitate downward, REIT ETFs may finally break free from recent sideways trading patterns. Positioning ahead of that potential inflection could prove rewarding for disciplined long-term investors.