US REITs Rise as Yields Stay High

That does not mean rates no longer matter. They still lift refinancing costs and can squeeze valuation multiples. But for many US REITs, earnings momentum is now doing enough of the heavy lifting to offset the bond-market headwind. Cohen & Steers has projected REIT earnings growth of about 9% in 2026 and 8% in 2027, which helps explain why the sector can keep advancing even with bond yields above where investors would usually like them.

Vonovia tells the other side of the story. Germany’s biggest residential landlord is still operating in a market where higher Bund yields hit property stocks more directly, and where housing policy is now adding another layer of risk. The 10-year German government bond yield recently touched its highest level in 15 years, and the Stoxx 600 Real Estate index dropped to its lowest point since mid-July. That is classic bond-proxy behavior: when financing costs rise, the sector feels it fast.

Vonovia has tried to get ahead of that pressure by locking in funding early. In the first half of 2026, it refinanced about 4.4 billion euros of debt at an average maturity of eight years and an average euro coupon of roughly 3.2%. Management says the capital structure remains solid and that higher financing costs are still within plan. For investors, that is the key distinction: the rent collection machine is not the main problem. The question is how expensive debt becomes and how quickly the company can complete property sales to support the balance sheet.

Berlin politics only complicates the picture. After the Sept. 20 election, the Left, Greens and SPD began sounding out a possible path toward socializing large landlords in the capital. Vonovia, through Deutsche Wohnen, owns about 138,000 apartments in Berlin and surrounding areas, so the debate is not theoretical. Even if the federal government wants to block state-level expropriations, the prospect of renewed intervention keeps a political discount on the shares.

For investors, the message is not to abandon real estate stocks, but to stop treating them as one trade. Hotels, data centers and senior housing are performing very differently from residential landlords, and the US market shows why selectivity matters. Income investors chasing REIT yields can still find durable cash flows, but they should focus on debt maturities, leverage, hedging and dividend coverage rather than assuming lower rates will do the work for them.

The next few weeks could clarify the setup. The Federal Reserve meets on Oct. 28, the European Central Bank follows a day later, and Vonovia is due to report on Nov. 4. If rates stay high, the market will keep separating the companies that can absorb the cost of capital from those that cannot. For long-term investors, that makes quality balance sheets and dependable cash generation more important than ever.