Uncover the Dominance: This Surprising Investment Outshines the S&P 500 with Steady, Impressive Gains

Stubborn inflation is just the newest landmine that investors are trying to sidestep to protect their portfolios. The April 2026 Consumer Price Index (CPI) showed prices rose 3.8% from the same period a year ago, which was the highest rate since May 2023.

It's jarring to hear that, and with so much whipsawing in the markets each day, it can be difficult to figure out where to invest for the long haul. Fortunately, history can guide us toward an investment that has outperformed the S&P 500 since 1994: industrial real estate trusts (REITs).

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Building a more robust portfolio

REITs essentially act as landlords of vast real estate portfolios, and there are REITs for almost any investable area you can think of: data centers, housing, office space, and more. For investors, the benefit of REITs is not only the scale of their portfolios that can generate massive cash piles, but also the fact that they generally must pay out 90% of their taxable income to shareholders as dividends.

In particular, the industrial REIT sector has performed well for over three decades, delivering an average annual return of 13.5% from 1994 to 2025. In comparison, the S&P 500 averaged a 12.3% return.

For the reasons why, we can turn to Motley Fool research. "With more people shopping online, industrial REITs, especially those focused on logistics properties, have expanded rapidly by developing new distribution centers to support this growth. The robust demand for warehouse space following the pandemic has enabled REITs to capture significantly higher rental rates as leases expire and renew at current market rates."

For one of the many investable opportunities in the space, we can turn our attention to First Industrial Realty Trust (NYSE: FR). Let's dive in.

How to invest in the industrial REIT space

First Industrial focuses its portfolio on regional and bulk distribution centers. It has a total of 71.6 million square feet of industrial space and 424 properties owned and under development.

The stock has a favorable dividend payout that currently yields above 3%, and the company also announced in its 2026 first-quarter earnings results that it was launching a new share buyback program to potentially repurchase up to $250 million in stock.

Its performance has been on par with the S&P 500 this year, but remember that from 1994 to 2025, this sector has delivered a larger return. REITs also tend to be less volatile, making industrial REITs worthy of investment consideration. As Motley Fool research points out:

The U.S. Congress created REITs to level the playing field so all investors could access income-producing, wealth-creating real estate. That has turned out to be a boon for the average investor because REITs have outperformed stocks over the very long term -- thanks partly to their dividends -- and have been less volatile.

Jack Delaney has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.