Real estate can be an effective way for investors to hedge against inflation and potentially generate big returns. Buying physical property can be difficult and expensive, but you can easily invest in real estate by buying shares of real estate investment trusts, or REITs. There are many different types of REITs, and many of them pay sizable dividends. In addition to REITs, the real estate sector includes management and development stocks that may not actually own properties.
Here are eight of the best real estate stocks to buy in 2023, according to CFRA Research analysts:
|Stock||Implied upside from Sept. 14 close|
|Prologis Inc. (ticker: PLD)||14.2%|
|American Tower Corp. (AMT)||18.7%|
|Ventas Inc. (VTR)||14.9%|
|Public Storage (PSA)||15.9%|
|Welltower Inc. (WELL)||7.7%|
|Realty Income Corp. (O)||19.7%|
|Vici Properties Inc. (VICI)||17.4%|
|Alexandria Real Estate Equities Inc. (ARE)||27.1%|
Prologis Inc. (PLD)
Prologis is an industrial REIT that specializes in logistics real estate. Analyst Michael Elliott says there is strong demand for Prologis’ logistics centers and a high barrier to entry for competitors given zoning entitlement requirements. Elliott estimates the company’s properties have roughly $35 billion in value creation potential, and he says Prologis should retain pricing power as difficult financing conditions slow supply growth. Elliott projects between 38% and 40% revenue growth in 2023 and says the company’s $6.4 billion in liquidity gives it substantial financial flexibility. CFRA has a “strong buy” rating and $141 price target for PLD stock, which closed at $123.46 on Sept. 14.
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 risk of a slowdown in telecom spending in 2023 and 2024 have been fully priced into American Tower shares, leaving room for valuation upside. He says mobile video growth, buildouts in mid-spectrum bands and unlimited data plans will be long-term demand drivers, with international markets positioned to be the largest growth opportunities for American Tower. Elliott projects 3% to 5% revenue growth in 2023. CFRA has a “buy” rating and $215 price target for AMT stock, which closed at $181.08 on Sept. 14.
Ventas Inc. (VTR)
Ventas is a REIT that specializes in health care facilities, including specialty care facilities, housing for seniors, medical office buildings and hospitals. Elliott says senior housing is in the early innings of a potentially decade-long growth phase. The population of seniors ages 80 and above is on track to grow 4.4% annually from 2023 to 2030, while health care spending is projected to grow 5% annually over the same period. Elliott projects revenue growth of between 7% and 9% for Ventas in 2023. CFRA has a “buy” rating and $51 price target for VTR stock, which closed at $44.37 on Sept. 14.
Public Storage (PSA)
Public Storage is the largest owner of self-storage facilities in the U.S. Elliott says self-storage demand will continue to moderate following a post-pandemic boom, but Public Storage should be able to continue to increase rental rates given muted supply growth. In addition, the company is focused on opportunistic acquisitions, such as its recent $2.2 billion buyout of Simply Self Storage. Elliott says Public Storage has a high-quality balance sheet, including roughly $700 million in cash. He projects between 8% and 10% revenue growth in 2023. CFRA has a “buy” rating and $320 price target for PSA stock, which closed at $276.09 on Sept. 14.
[READ: Best Value Stocks to Buy Now.]
Welltower Inc. (WELL)
Welltower is a REIT that invests in health care facilities, including senior housing, specialty care facilities and medical office buildings. The REIT is already up 28.9% this year through Sept. 14, the best 2023 performance of any stock on this list. Elliott says senior housing market conditions are improving and anticipates Welltower’s occupancy rates and pricing power will trend higher in the next 12 months. In addition, risks from new variants of COVID-19 have decreased. Elliott estimates Welltower will generate between 12% and 14% revenue growth in 2023. CFRA has a “buy” rating and $91 price target for WELL stock, which closed at $84.51 on Sept. 14.
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 have a 5.6% forward dividend yield, the highest of any stock on this list. It also pays its dividend monthly rather than quarterly, making it an attractive option for income investors. Elliott says a large portion of Realty Income’s retail tenants operate nondiscretionary or service-oriented businesses, making them less vulnerable to an economic downturn. He projects between 18% and 20% revenue growth in 2023. CFRA has a “buy” rating and $66 price target for O stock, which closed at $55.12 on Sept. 14.
Vici Properties Inc. (VICI)
Vici Properties is a specialized REIT that owns gaming, hospitality and entertainment properties, including Caesar’s Palace in Las Vegas. Vici has been aggressively acquiring major properties, including the acquisition of the remaining 49.9% interest in the MGM Grand Las Vegas and Mandalay Bay Resort from Blackstone Real Estate Income Trust for $1.27 billion in January 2023. Elliott says Vici has best-in-class casino properties, a modest valuation and opportunities for rental revenue upside. He projects 36% revenue growth in 2023, driven largely by recent acquisitions. CFRA has a “buy” rating and $37 price target for Vici stock, which closed at $31.51 on Sept. 14.
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 21.7% through Sept. 14 this year, making it the worst-performing stock on this list. Analyst Kenneth Leon says the life science real estate market is recession-resistant, and Alexandria’s diversified mix of tenants helps protect the company from the inherent risks of biopharmaceutical startup failures. The company’s average lease term is 7.2 years. Leon projects 2024 revenue growth of 11.6% and same-property occupancy rates of between 94% and 95%. CFRA has a “buy” rating and $145 price target for ARE stock, which closed at $114.13 on Sept. 14.
More from U.S. News
Update 09/15/23: This story was previously published at an earlier date and has been updated with new information.