Real estate ETFs outperform broader market despite interest rate volatility in 2026.

In 2026, real estate ETFs like XLRE, VNQ, and SCHH have outperformed broader market indexes such as the S&P 500, despite volatility caused by shifting interest rate expectations. The surge in data center REITs, driven by demand for AI infrastructure and cloud computing, has been a key factor in this outperformance. However, the real estate sector remains sensitive to Federal Reserve policies, with future ETF performance dependent on upcoming interest rate decisions. Investors should watch for potential rate hikes that could impact financing costs and sector volatility in the second half of the year.