Persistently elevated inflation and sharply rising interest rates have investors concerned about 1970s-era stagflation returning in 2023. The last time stagflation was a problem, real estate was a top-performing sector in the market.
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Buying physical property can be difficult and expensive, but investors can easily invest in real estate by buying shares of real estate investment trusts, or REITs. There are many different types of REITs, and most of them pay sizable dividends and serve as reliable sources of income. Here are eight of the best real estate stocks to buy in 2023, according to CFRA analysts:
| Stock | Implied upside from June 7 close |
| Prologis Inc. (ticker: PLD) | 10.1% |
| American Tower Corp. (AMT) | 20.5% |
| Equinix Inc. (EQIX) | 7.9% |
| Public Storage (PSA) | 9.6% |
| Realty Income Corp. (O) | 14.8% |
| Welltower Inc. (WELL) | 8.2% |
| Alexandria Real Estate Equities Inc. (ARE) | 20.7% |
| Ventas Inc. (VTR) | 14.2% |
Prologis Inc. (PLD)
Prologis is an industrial REIT that specializes in logistics real estate, which includes properties like warehouses and distribution centers. Analyst Michael Elliott says many Prologis logistics centers are located in high-demand locations that require zoning entitlements, making it difficult for competitors to gain access. In these markets where land and access are limited, Elliott says Prologis’ property portfolio differentiates it from competitors and is worth far more than its $3.5 billion in book value. Difficult financing conditions will likely slow supply growth, and Elliott projects at least 38% revenue growth for Prologis this year. CFRA has a “strong buy” rating and $141 price target for PLD stock, which closed at $128.06 on June 7.
American Tower Corp. (AMT)
American Tower is a specialized REIT that operates the world’s largest independent portfolio of wireless communications and broadcast towers. Elliott says mobile video growth, unlimited data plans and mid-spectrum 5G network bands are long-term tailwinds for American Tower demand, and risks associated with an economic slowdown and acquisition integration are already fully reflected in the stock’s valuation. Elliott says even 4G network penetration is only moderate in regions such as Africa and Latin America, creating significant international growth opportunities. He projects at least 3% revenue growth in 2023. CFRA has a “buy” rating and $230 price target for AMT stock, which closed at $190.93 on June 7.
Equinix Inc. (EQIX)
Equinix is a specialized REIT and is the world’s largest data center operator. Elliott says Equinix has a highly recurring revenue base that generates significant earnings visibility. In addition, the massive costs and infrastructure required for data centers creates a major barrier to entry for competitors. Elliott says Equinix is the preferred cloud partner for a number of the world’s largest technology companies, and the company’s Equinix Metal service has demonstrated impressive booking growth. In addition, the company has a number of projects underway to improve capacity. CFRA has a “buy” rating and $797 price target for EQIX stock, which closed at $738.95 on June 7.
Public Storage (PSA)
Public Storage is the largest owner of self-storage facilities in the U.S. Elliott says the company has a diverse, high-quality portfolio of assets, and the self-storage market is currently generating positive fundamental demand trends. Elliott expects demand to continue to outpace supply throughout 2023, creating the potential for rising rental rates and margins without risking occupancy rates. In addition, he says Public Storage’s strong balance sheet will provide opportunities for additional acquisitions to help expand the company’s breadth and improve its portfolio quality. CFRA has a “buy” rating and $320 price target for PSA stock, which closed at $291.87 on June 7.
[See: 10 Best Value Stocks to Buy Now]
Realty Income Corp. (O)
Realty Income is a retail REIT that owns, develops and manages U.S. retail real estate with a focus on single-tenant buildings. Realty shares pay a 5.1% dividend, the highest yield of any stock on this list. Elliott says Realty is more insulated from the weak retail environment than many of its peers given the company’s higher exposure to non-discretionary and service-oriented tenants, such as grocery, convenience and drug stores. He says investors don’t seem to fully appreciate the company’s resistance to a downturn in consumer spending. CFRA has a “buy” rating and $70 price target for O stock, which closed at $61 on June 7.
Welltower Inc. (WELL)
Welltower is a health care REIT that invests in health care facilities, including senior housing, specialty care facilities and medical office buildings. Including dividends, the REIT is already up 24.6% in 2023 through June 7, the best year-to-date performance of any stock on this list. Elliott says COVID-19-related risks are subsiding and Welltower’s outlook will continue to improve over the next 12 months. Favorable supply and demand conditions are emerging in the senior housing market, and Elliott says an aging population of Americans will lift demand further in coming years. CFRA has a “strong buy” rating and $87 price target for WELL stock, which closed at $80.42 on June 7.
Alexandria Real Estate Equities Inc. (ARE)
Alexandria Real Estate Equities owns properties containing office and laboratory space for the life sciences industry. Shares are down 15.6% year to date through June 7, making it the worst-performing stock on this list. Analyst Kenneth Leon says Alexandria is the market leader in life science real estate, and the stock’s 2023 weakness is a buying opportunity. Leon says life science real estate is a secular growth market and is more resistant to a recession than other property types. He says Alexandria’s high-quality tenant base protects the company from biotech failure risks. CFRA has a “buy” rating and $147 price target for ARE stock, which closed at $121.79 on June 7.
Ventas Inc. (VTR)
Ventas is a health care REIT that specializes in health care facilities, including specialty care facilities, housing for seniors, medical office buildings and hospitals. With COVID-19 headwinds dying down, Elliott says high-quality senior housing could be a high-growth investment opportunity over the next decade, driven by positive supply and demand trends and an aging population. He estimates the population of Americans ages 80 and above will grow 4.4% annually from 2023 to 2030, and health care spending will grow 5% annually over that same period. CFRA has a “buy” rating and $53 price target for VTR stock, which closed at $46.39 on June 7.
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8 Best Real Estate Stocks to Buy originally appeared on usnews.com
Update 06/08/23: This story was previously published at an earlier date and has been updated with new information.
