Earnings Update: Net Lease REITs (Q1 2026)
Net lease REITs have remained surprisingly resilient in 2026 in the face of another spike in interest rates and inflation.
Recall from previous reports on the net lease sub-sector that these REITs are often perceived as some of the most sensitive to swings in interest rates. Our research has found that net lease REIT fundamentals are not, on average, any more sensitive to interest rates than for most other REITs. But when it comes to stock prices, perception is reality.
That’s what makes the resilient rebound of net lease REITs so pleasantly surprising this year.
The sole net lease ETF (NETL) has generated 12.5% in total returns YTD, compared to the broader real estate sector’s (VNQ) 8.8% and the S&P 500’s (SPY) ~8%.
If interest rates and inflation were still trending downward, as they were for much of last year, then this would not be surprising.
But the opposite is happening.
The conflict in Iran and closure of Hormuz has pushed rates and inflation to their highest levels in years.
To cut to the chase, the answer to this anomaly is that the market is looking through this inflationary spike. While the current environment does raise net lease REITs’ cost of new long-term debt in the short term, the macroeconomic elements are simply not in place for a sustained swell of prices across the economy.
Growth in the money supply is low, wage growth is low, job growth and population growth are stagnant, and most consumers are being forced to cut back on everyday spending due to higher gas prices.
The economy is overwhelmingly being driven by AI-related capex and affluent consumer spending.
This kind of environment does not lend itself well to broad-based and sustained inflation.
What we have instead is a temporary inflationary shock.
This shock has pulled up one-year-ahead inflation expectations by a significant amount, but three-year-ahead expectations have only risen off their typical 3% level by a small amount.
We continue to believe that the current inflationary spike will be temporary, although we can’t predict how significant it will be during this temporary period because of unknowable factors related to geopolitics.
Widespread belief in the transience of this painful inflationary spike explains why REITs and especially net lease REITs are staging a nice comeback this year.
It also helps that net lease REITs, along with the broader REIT sector, had reached very low valuations at the end of 2025, especially relative to the S&P 500.
We think net lease REITs have more room to rally and should exhibit solid fundamentals this year, turning in mid-single-digit growth on average.
With that said, let’s get to the earnings updates for our four net lease REITs:
