"I'd say if three years ago, if all vectors were moving in the wrong direction, they are now all moving in the right direction," says Jon Cheigh, a senior vice president at Cohen & Steers and manager of the Cohen & Steers Realty Shares fund. "On the supply side, you're not really seeing new office buildings and apartments being built, so that means there's no new competition."

As the economy improves, that means people are chasing less space.

Though Cheigh says the economic outlook has not been entirely rosy, "We have some positive economic growth coupled with no new supply. That usually means you're seeing occupancies in real estate go up and you're seeing rents go up. You're seeing that most dramatically in hotels and apartments. But for the most part, you're seeing it across the board."

Marc Halle, a senior portfolio manager overseeing global real estate securities for Prudential Real Estate Investors, agrees with that assessment of the market. Ironically, he says, the sluggish gross domestic product growth-an anemic 2%-3% GDP-is helping real estate investment trusts: New construction hasn't taken off the way it would if GDP were 7%, and yet corporate profits are still rising, boosting margins and (slowly) employment and putting people in offices.

Philip Martin, a REIT strategist at Morningstar, adds, "We have relatively healthy commercial supply; we're not oversupplied on a national level. Certainly, market by market or region by region, we might be a little oversupplied, but it's not a five-year oversupply issue."

Now that REITs have rebuilt their balance sheets, they're also in a position to play some offense. "You've seen REITs be very acquisitive over the last 18 months," says Cheigh, "buying high quality commercial real estate throughout the country but in the better markets and then financing that through new bond issuances or new equity." This mostly means buying in gateway cities such as New York, Washington, D.C., Boston and San Francisco and downtown core business districts where new construction is lacking even as people slowly go back to work.

The turnaround has allowed companies to start meaningfully increasing their dividends again after slashing them in the past 24 months. "Last year, 2010, companies grew their dividends probably somewhere between 15% and 20%," says Cheigh. Still, he warns, "They look like big increases but some of them are just closer to where they were before they had to cut them."

He thinks that dividends will grow 10% a year over the next five years. "I'd say just the collecting of rent, the availability of capital on the balance sheet side, the acquisitions and the dividends-it's lots of things taken together that are driving the stocks."

One of those is prominent landlord Equity Residential. "They've been very aggressive in buying and improving the quality of the portfolio," Cheigh says. "They've bought a lot of apartment buildings in New York that are doing very well and their cash flows and earnings are growing at double digits. As a result, it's been helping them pay out higher dividends."

In its earnings call in late July, Equity Residential said that it had 95.4% occupancy in its portfolio. With vacancies down, rents are going up, which has boosted the company's funds from operations, (or FFO, analysts' preferred measure of a REIT's cash-generating ability, rather than of earnings per share, which includes depreciated assets that confuse the analysis). After slashing its dividend in 2009 (the way other companies did), Equity Residential boosted its quarterly dividend in the fourth quarter of 2010 for an annual rate of $1.47 per share, and it expects the new dividend for 2011 to be $1.56 to $1.59, in a payout that it designed to equal 65% of normalized FFO for the year. Payouts at that level give certain companies more room to maneuver and maintain their dividend payments, says Martin, as well as grow them.