Real Estate Funds Positioned for Growth: Three REIT ETFs Worth Watching

Why REIT ETFs Matter Now

The real estate sector has faced headwinds recently. With elevated borrowing costs dampening construction activity and remote work reshaping office demand, traditional property investments have delivered lackluster returns—just 6% over three years compared to the S&P 500’s impressive 66% climb. Yet as the Federal Reserve signals potential rate cuts, the landscape is shifting.

Real estate investment trusts (REITs) present a compelling alternative. These structures mandate distributing 90% of earnings to shareholders as dividends, making them ideal for income-focused investors. Beyond income, real estate funds offer instant portfolio diversification. Investors can target specific sectors like data centers, healthcare, or wireless infrastructure, or opt for broad-based exposure across the entire real estate market.

Three REIT ETF Options to Monitor

Broad-Based Exposure: VNQ

For investors seeking comprehensive real estate fund exposure, the Vanguard Real Estate Index Fund ETF (VNQ) serves as a solid foundation. This real estate fund tracks a wide market index spanning large, mid, and small-cap properties, managing $64 billion in assets.

VNQ holds 153 different securities, preventing any single name from exceeding 7% of the portfolio. The top five holdings—Welltower, Prologis, American Tower, Equinix, and Digital Realty—represent just 26% of the fund. This genuine diversification offers meaningful risk reduction compared to concentrated alternatives.

Performance-wise, VNQ delivered 3.8% year-to-date returns while maintaining an attractive 3.8% dividend yield. The real estate fund charges only 0.13% annually, among the industry’s lowest fees. As borrowing costs potentially decline, income-generating real estate funds like VNQ should attract increased investor attention.

Specialized Growth: DTCR

The Global X Data Center and Digital Infrastructure ETF (DTCR) targets a specific megatrend: explosive data center demand fueled by artificial intelligence expansion. This real estate fund tracks data center-focused REITs and related infrastructure assets.

The numbers tell a compelling story. Grand View Research projects the data center construction market expanding from $241 billion in 2024 to $456 billion by 2030—an 11.8% compound annual growth rate. DTCR has already delivered 23.4% returns in 2025, demonstrating investor enthusiasm for this real estate fund thesis.

DTCR concentrates in five major holdings: Equinix, Digital Realty Trust, American Tower, Crown Castle, and Applied Digital collectively represent over 45% of the real estate fund. With $605.8 million in assets, it charges 0.5% annually. The 1.3% yield reflects companies prioritizing land and infrastructure acquisition over dividend distributions.

Global Diversification: RWO

The SPDR Dow Jones Global Real Estate ETF (RWO) provides the most expansive real estate fund approach, holding 220 securities globally. This real estate fund incorporates both REITs and traditional real estate companies worldwide.

RWO’s diversification extends internationally—approximately 30% of this real estate fund stems from non-U.S. companies. This geographic spread offers currency diversification benefits; when international profits convert back to dollars, a weakened greenback can amplify returns. The real estate fund delivered 8.7% year-to-date performance with a robust 3.6% dividend yield.

Top holdings include Welltower, Prologis, Equinix, Simon Property Group, and Realty Income, collectively forming 28% of the real estate fund. At 0.5% annually, expenses are reasonable given the broad exposure this real estate fund provides.

Evaluating Your Real Estate Fund Options

Each real estate fund serves different investment objectives:

VNQ appeals to cost-conscious income investors seeking traditional real estate exposure through a single, liquid holding. The expense ratio is unbeatable, and dividend yields support steady cash flow.

DTCR attracts growth-oriented investors betting on AI and data center infrastructure expansion. This real estate fund offers concentrated upside but with correspondingly higher volatility.

RWO balances growth potential, international exposure, and income generation. This real estate fund provides middle-ground characteristics suitable for diversified portfolios.

Looking Ahead

As interest rate policy shifts direction, real estate funds should become increasingly attractive relative to cash and bonds. The sector’s forced dividend distributions make these real estate funds particularly valuable in a lower-rate environment. Whether your strategy emphasizes income, growth, or diversification, quality real estate funds now offer meaningful opportunities for portfolio enhancement.