By Paul R. La Monica
Welcome back to the real world.
Real estate investment trusts are suddenly a haven in a market dominated by fears about Iran, rising oil prices, and the unwinding of the artificial-intelligence trade. Investors are flocking to them for the physical assets they own -- and the very real dividends they pay.
The State Street Real Estate Select Sector SPDR exchange-traded fund is up nearly 4.5% this year, while the S&P 500 index has slid more than 2%. "REITs have long been ignored, but they are finally getting their day in the sun," said Iman Brivanlou, senior portfolio manager for the TCW Real Estate equity strategy.
REITs are in a sweet spot. With inflation still a concern, REITs should benefit, Brivanlou argues, since property values and rental income tend to go up along with consumer prices. But with many economists also predicting that the Federal Reserve will resume its interest-rate cutting cycle later this year, that could also stimulate the economy and make the dividends that REITs pay out more attractive as well. The average yield for the stocks in the State Street ETF is 3.3%.
"REITs still look like good bond proxies," Brivanlou says. "They are an inflation hedge, and they have an advantage because of the dividend yield. "
Brivanlou likes wireless infrastructure companies American Tower, SBA Communications, and Crown Castle, which he thinks will benefit from the continued rollout of AI services. SBA has a dividend yield of 2.7% while American Tower and Crown Castle yield 3.8% and 4.9%, respectively.
REITs focusing on senior-living centers might also be a good bet. Brivanlou likes Welltower, which yields only 1.4%, as a demographics play -- a bet that America's aging population will need more medical care. Adrian Helfert, chief investment officer of Westwood, points to Welltower competitor Ventas, which the firm owns in its Westwood Enhanced Income Opportunity ETF.
The Westwood ETF also owns two other REITs as top holdings, storage warehousing firm Prologis and apartment rental company Essex Property Trust, which should get a lift from the fact that home buying remains out of reach for many people. Helfert argues that the three companies benefit from being able to lock in tenants for longer periods. "These stocks have better transparency of cash flows," Helfert said, adding that they're not tied to more cyclical sectors such as retail and hotels, or face concerns about vacancies and the prospect of higher property taxes in New York City, as office owners do.
Still, don't be surprised to see REITs broadly continue to pick up steam. In addition to State Street's ETF, Vanguard Real Estate, Schwab U.S. REIT, and iShares Core U.S. REIT are good ETF options for investors. And despite this year's rally, these four ETFs still trade at a notable discount to the broad market. They are all valued between 16 and 18 times earnings estimates for this year, versus a price/earnings ratio of nearly 22 for the S&P 500.
REITs are on sale. It's time for investors to play landlord and snatch up some property of their own.
Write to Paul R. La Monica at paul.lamonica@barrons.com
This content was created by Barron's, which is operated by Dow Jones & Co. Barron's is published independently from Dow Jones Newswires and The Wall Street Journal.
(END) Dow Jones Newswires
March 13, 2026 02:00 ET (06:00 GMT)
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