Investors are increasingly eyeing the real estate sector with optimism as the Federal Reserve edges closer to initiating its much-anticipated rate-cut cycle.

Real Estate Investment Trusts (REITs) have emerged as a standout performer in August, leading the market in gains while also becoming a magnet for investor inflows.

Five out of the 64 U.S.-listed real estate exchange-traded funds (ETFs) have collectively pulled in a robust $2.2 billion in net inflows over the past month.

This influx of capital represents more than half of the total inflows that these ETFs have attracted over the entire past year, as...