US REIT same-store net operating income growth slips in Q1

US equity real estate investment trusts reported a marginal decline in the median growth rate of their same-store net operating income in the first quarter as the commercial real estate market continues to face macroeconomic challenges.

The same-store net operating income (NOI) across publicly-traded REITs grew year over year at a median rate of 2.7% in the first quarter, lower than the 3.0% median increase in the previous quarter, according to an S&P Global Market Intelligence analysis. The growth during the first quarter is also weaker than the 2.8% median growth rate for the entire 2024. The median same-store occupancy across the sector stood at 94.1% during the quarter.

S&P Global Market Intelligence prefers to use cash-based same-store net operating income, if available. However, a noncash-based NOI will be used if not.

While earnings trends within the portfolio of publicly traded REITs might not match all privately owned properties, during a time when commercial real estate is being scrutinized, the data reported by public REITs can provide valuable insight into potential earnings trends for commercial real estate as a whole.

Healthcare records largest gain

Among all US equity REITs, the healthcare sector recorded the largest year-over-year gain in same-store NOI during the first quarter, with a median increase of 7.1%.

Healthcare REITs comprised five of the top REITs with the highest same-store NOI growth in the first quarter. Diversified Healthcare Trust posted growth of 20.7% during the period, the largest increase overall.

Diversified Healthcare Trust experienced an improvement within its senior housing operating portfolio (SHOP) segment as same-property NOI came in at $38.4 million in the first quarter, marking a 33.6% sequential increase and a 42.1% year-over-year jump, CEO Christopher Bilotto said during a May 6 earnings call.

"In addition, our 115 same-property Five Star managed communities posted an NOI margin of 14.6%," Bilotto said, adding that the REIT's occupancy increased by 130 basis points year over year to 80.2%, resulting in a 6.5% increase in SHOP revenue.

The industrial sector came in second, with an annual median increase of 5.0%. First Industrial Realty Trust Inc. led the industrial REITs, ending the first quarter with same-store NOI of $121.7 million, a 10.1% increase from the same period in 2024.

"Our cash same-store NOI growth for the quarter, excluding termination fees, was 10.1%. The results in the quarter were primarily driven by increases in rental rates on new and renewal leasing, contractual rent bumps and slightly higher average occupancy," First Industrial Realty Trust CFO Scott Musil said on an April 17 earnings call.

During the first quarter, the office segment incurred losses in its same-store NOI, posting a median year-over-year decline of 0.9%. The self-storage segment recorded a median same-store NOI year-over-year drop of 0.8%.

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Top gainers in same-store NOI among REITs

NexPoint Diversified Real Estate Trust was the second-biggest gainer after Diversified Healthcare Trust among US REITs in the first quarter, logging a year-over-year growth of 20.0% in same-store NOI.

American Healthcare REIT Inc. posted a 15.1% year-over-year growth in same-store NOI during the quarter, the third-biggest increase among US REITs.

In the first quarter, American Healthcare REIT's same-store NOI growth was led by its Trilogy and SHOP operating portfolio segments, COO Gabriel Willhite said on a May 9 conference call. Same-store NOI grew by 19.8% year over year at Trilogy and 30.7% within SHOP during the period.

For 2025, American Healthcare raised its full-year same-store NOI growth targets for the total portfolio to a range of 9% to 13%, up from a previous range of 7% to 10%, CFO Brian Peay said during the earnings call.

REITs with the largest same-store NOI drop

Gladstone Land Corp. reported the largest same-store NOI year-over-year decline of 16.5% among US REITs during the quarter.

Office REIT Creative Media & Community Trust Corp. followed with a 10.9% decline, while Office Properties Income Trust reported a same-store NOI drop of 10.5% year over year.

Office Properties Income Trust expects same-property cash basis NOI to decrease by 10% to 12% year over year in the second quarter, driven by tenant vacancies and an increase of free rent from recent leasing activity, CFO Brian Donley said during a May 1 earnings call.