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As of the time of writing, the S&P 500 has delivered about 17% year-to-date. In the event of a “Santa Claus rally” in the next few weeks, the index could potentially close with a 20% return on the year. If that were to happen, it would be the third year in a row with an annual return of 20% or more.

For all the worries, for all the narratives investors latched on to over the months, in the end, it was a wonderful year for markets once again. But that doesn’t mean it was wonderful for every stock.

And in the commercial real estate sectors that we follow so closely, there were clear winners and losers. Today, we’ll have a closer look at which property sectors made the most of 2025, and which fell short. And we’ll start with a loser first.

Loser: Life Sciences

You’d be hard-pressed to find a more miserable property sector than life sciences this year. These lab facilities – typically leased by pharmaceutical and biotechnology companies – have been dealing with one of the worst supply/demand imbalances I’ve seen in my career.

You’ll remember from a recent article how I showed that the COVID-19 era created something of a land rush for life sciences. Every pharma or biotech company, it seemed, poured resources into potential COVID-19 treatments.

The message that was sent to developers was to build more facilities – much more. And that’s exactly what they did. But then, the thing that always happens in these situations happened to life sciences properties. They overbuilt.

And as the urgency around COVID-19 receded in the years that followed – and as rising rates slowed venture capital investment into biotech – that overwhelming supply ran headfirst into weaker demand.

The result is that life sciences has been something of a mess in 2025. And it has taken its toll on even great companies like Alexandria Real Estate (ARE). That stock is down about 50% on the year as of the time of writing.

That’s not necessarily the fault of Alexandria’s management. After all, there’s only so much they can do to mitigate these market conditions. But it does mean that this property sector has – in general – been a money pit all year.

Now, that might change as we go forward into next year. Markets are nothing if not adaptable. And if we do see a turnaround take shape in life sciences next year, rest assured that readers of Wide Moat Research will be the first to know.

Loser: Cold Storage

Another sector that has struggled is cold storage – the warehouse-sized, climate-controlled buildings that store food before it ends up on grocery-store shelves. It wasn’t that long ago that these businesses were adored by real estate investment trusts (“REIT”) investors.

During the lockdown years, people were stuck at home. So, they prepared their own meals. All that food had to be stored somewhere before being bought. And in facilities owned by Americold Realty Trust (COLD) and Lineage (LINE) is where a lot of it ended up. But, similar to life sciences, that new demand wasn’t permanent. The world got back to business. And cold-storage facilities fell from grace.

Management from Americold also called out inflation, a weaker consumer, and a reduction of government benefits as another headwind. Americold and Lineage are down about 38% and 34%, respectively, on the year.

But, also like life sciences, there could be a turnaround story here. Demand for these facilities isn’t going away. After all, everybody has to eat. We’ll keep a close eye on this sector and see if its fortune can turn in 2026.

Winner: Triple-Net

My readers might say I think triple-net lease REITs are always winners. After all, these businesses push all the expenses of owning properties – taxes, insurance, maintenance – onto the tenants. And because these tenants tend to be high-quality, with long lease terms and built-in rent escalators – all the REITs really have to do is cash the checks.

But an interesting development I’ve seen in the triple-net space this year has to do with how these companies are, more and more, acting as a stand-in for private equity or traditional banks.

This year, we’ve seen sale-leasebacks soar. As longtime readers know, that’s when a business sells a property to a REIT and then leases it back immediately. But what few understand is that this is, effectively, just a form of financing. And at a time when rates are still elevated, more of these deals took place.

In fact, as of the third quarter, volume for these deals is up 23% over 2024. And the volume for the third quarter was the second-highest total in 10 years. One of the winners this year is none other than Realty Income (O), the biggest triple-net lease on the market. As of the time of writing, the stock has returned about 13%. At its peak this year, that total return was about 20%.

If interest rates continue to trend down into 2026, look for REITs like Realty Income – with massive scale and cost of capital advantages – to perform and then outperform.

Winner: Health Care

Health care has been a standout in 2025. Full stop.

For evidence, just look at something like Welltower (WELL). The company owns a portfolio of senior living facilities. The stock has returned about 52% on the year. That not only handily beats the S&P 500, it’s also nearly double the return from Nvidia.

The bullish case for health care is easy – America’s Baby Boomers (all 76.4 million of them) are getting older. In fact, 2025 is believed to have been “peak 65,” or the year that a record number of people turned that critical age.

And while 2025 might end up being the peak, this trend is not going away. Millions of Americans will age into retirement every year going forward. And as they do, they’ll make more use of health care and long-term care facilities. This “silver tsunami” trend has legs, and it should be a years-long tailwind for health care REITs.

One name I continue to like in this space is Healthpeak Properties (DOC). And while the stock is down about 12% on the year, it continues to boast an impressive portfolio of medical and senior living facilities in its portfolio. It’s also cheap and has a dividend yield of about 6.7%.

Look for Healthpeak and other health care REITs to see heightened demand in the years ahead.

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