The Best REITs to Buy (2025)

Real estate investment trusts, also known as REITs, typically offer high yields, making them appealing choices for income investors. The real estate stocks that Morningstar covers, as a group, looked 8.5% undervalued as of July 12, 2024.

REITs are interest-rate-sensitive, which means they tend to outperform the broad market when interest rates fall and underperform when interest rates rise. During the trailing one-year period, the Morningstar US Real Estate Index returned 7.25%, while the Morningstar US Market Index returned 26.40%.

The Six Best REIT Stocks to Buy Now

The REIT stocks below were trading at the largest discounts to Morningstar’s fair value estimates as of July 12, 2024.

  1. Pebblebrook Hotel PEB
  2. Park Hotels & Resorts PK
  3. Kilroy Realty KRC
  4. Macerich MAC
  5. Healthpeak Properties DOC
  6. Sun Communities SUI

Here’s a little more about each of the best REITs to invest in now, including commentary from the Morningstar analysts who cover them. All data is as of July 12.

Pebblebrook Hotel

  • Price/Fair Value: 0.52
  • Morningstar Uncertainty Rating: High
  • Morningstar Economic Moat Rating: None
  • Forward Dividend Yield: 0.30%
  • Industry: REIT—Hotel and Motel

Pebblebrook Hotel continues to hold the first spot as the least expensive company on our list of the best REITs to buy, trading 48% below our fair value estimate of $25.50 per share.

Pebblebrook Hotel Trust is the largest US lodging REIT focused on owning independent and boutique hotels. After Pebblebrook merged with LaSalle Hotel Properties in November 2018, the company owns 46 upper upscale hotels with more than 11,900 rooms, located primarily in urban gateway markets. Historically, Pebblebrook’s combined portfolio has had a higher revenue per available room price point and EBITDA margin than its hotel REIT peers.

The merger with LaSalle provided Pebblebrook with some new avenues to create value for shareholders. The company doubled in size while taking on only a portion of the general and administrative costs, making the combined company more efficient. Pebblebrook CEO Jon Bortz previously ran LaSalle and acquired many of the hotels in that portfolio. His knowledge of those hotels combined with management's demonstrated ability to maximize margins should allow him to implement cost-saving initiatives that drive up margins.

The coronavirus pandemic hit the operating results of Pebblebrook's hotels significantly with high-double-digit revPAR declines and negative hotel EBITDA in 2020. However, the rapid rollout of vaccinations across the country allowed leisure travel to recover quickly, leading to significant growth in 2021 and 2022. Growth decelerated in 2023, though the company continues to report improving occupancy and rate growth for most of the portfolio. We think Pebblebrook should continue to see solid growth as renovations executed across its portfolio were finished in late 2023 and early 2024, which should help drive high revPAR growth.

However, several factors will remain headwinds for hotels over the long term. Supply has been elevated in many of the biggest markets, and that is likely to continue for a few more years. Online travel agencies and online hotel reviews create immediate price discovery for consumers, preventing a hotel from pushing rate increases even though it is nearing full occupancy on many nights. Last, while the shadow supply created by Airbnb doesn’t directly compete most nights, it does limit Pebblebrook's ability to push rates on nights when it would have typically generated its highest profits.

Park Hotels & Resorts

  • Morningstar Price/Fair Value: 0.58
  • Morningstar Uncertainty Rating: High
  • Morningstar Economic Moat Rating: None
  • Forward Dividend Yield: 6.84%
  • Industry: REIT—Hotel and Motel

This undervalued REIT stock also operates in the hotel and motel industry. Park Hotels & Resorts has a forward dividend yield of 6.84% and trades 42% below our fair value estimate of $25 per share.

Park Hotels & Resorts is the second-largest US lodging REIT, focusing on the upper-upscale hotel segment. The company was spun out of narrow-moat Hilton Worldwide Holdings at the start of 2017. Since the spinoff, the company has sold all its international hotels and 23 lower-quality US hotels to focus on high-quality assets in domestic, gateway markets. Park completed the acquisition of Chesapeake Lodging Trust in September 2019, a complementary portfolio of 18 high-quality, upper-upscale hotels that should help to diversify Park’s hotel brands to include Marriott, Hyatt, and IHG hotels.

The coronavirus pandemic hit the operating results of Park’s hotels significantly, with high-double-digit revPAR declines and negative hotel EBITDA in 2020. However, the rapid rollout of vaccinations across the country allowed leisure travel to recover quickly, leading to significant growth in 2021 and 2022. Growth decelerated in 2023, though the company continues to report improving occupancy and rate growth for most of the portfolio. We think the company should continue to see solid growth as renovations completed in 2022 and 2023 drive revPAR growth above industry average for several years and allow for operating margins to slightly exceed the levels the company achieved in 2019.

However, the hotel industry will continue to face several long-term headwinds. Supply has been elevated in many of the biggest markets, and that is likely to continue for a few more years. Online travel agencies and online hotel reviews create immediate price discovery for consumers, preventing Park from pushing rate increases. Last, while the shadow supply created by Airbnb doesn’t compete directly with Park on most nights, it does limit Park’s ability to push rates on nights where it would typically generate its highest profits.

Kilroy Realty

  • Morningstar Price/Fair Value: 0.60
  • Morningstar Uncertainty Rating: High
  • Morningstar Economic Moat Rating: None
  • Forward Dividend Yield: 6.13%
  • Industry: REIT—Office

Kilroy Realty is 40% undervalued relative to our $59 fair value estimate. This cheap REIT stock operates in the office industry and offers a 6.13% forward dividend yield.

Kilroy is a REIT that owns, develops, acquires, and manages premier office, life science, and mixed-use real estate properties in Los Angeles, San Diego, the San Francisco Bay Area, Seattle, and Austin, Texas. It owns 121 properties consisting of approximately 17 million square feet. The company has positioned itself to benefit from the burgeoning life sciences sector with material exposure in its current portfolio and a future development pipeline. We also welcome management’s focus on ESG as it aligns its office portfolio to meet the sustainability requirements of its clients.

Kilroy’s management has been able to successfully time the boom in technological employment occurring in the largest metropolitan areas along the West Coast. The company’s strategy is to achieve long-term sustainable growth by developing and owning the highest-quality real estate in technology and life science market clusters. The quality of its portfolio is evident from the fact that its average age is just 11 years compared with 30 years for peers.

Economic uncertainty emanating from the pandemic recovery and remote work dynamic created a challenging environment for office owners. Employees are still hesitant to return to the office as office utilization remains around 50% of the prepandemic level. The vacancy rates in the Los Angeles and San Francisco office markets were recorded at 23.9% and 32.5%, respectively, in the fourth quarter of 2023. The current vacancy rate in both these cities is substantially higher than the vacancy rates during the height of the global financial crisis. The net absorption rate in West Coast markets remains materially negative as of fourth-quarter 2023, and rental growth figures are disappointing, especially given the inflationary environment.

However, we are seeing an increasing number of companies requiring their employees to return to the office. In the long run, we believe that remote work and hybrid remote work solutions will gain increasing acceptance, but offices will continue to be the centerpiece of workplace strategy and will play an essential role in facilitating collaboration, harnessing innovation, and maintaining company cultures.

Macerich

  • Morningstar Price/Fair Value: 0.64
  • Morningstar Uncertainty Rating: High
  • Morningstar Economic Moat Rating: None
  • Forward Dividend Yield: 4.40%
  • Industry: REIT—Retail

Next on our list of the best REITs to invest in now, Macerich operates in the retail industry. This cheap REIT stock trades 36% below our fair value estimate of $24 per share.

Macerich has successfully repositioned the company over the past decade as a true owner and operator of Class A regional malls. Over the past 13 years, the company has sold over $4 billion in mostly lower-quality assets, either directly owned or owned through joint ventures, and recycled the capital into acquiring new Class A malls, buying out its partners’ share in the unconsolidated portfolio or redeveloping its own portfolio. As a result, the company’s portfolio should produce higher tenant sales productivity, occupancy levels, and rent and therefore is much better positioned to face the economic headwinds of e-commerce. We expect Macerich to continue improving its portfolio through redevelopment, opportunistic acquisitions, and asset sales, which should deliver strong earnings growth for Macerich over time.

Macerich's moves to improve its portfolio quality were necessary to position the company for the omnichannel strategy many retailers are pursuing. E-commerce continues to pressure brick-and-mortar retail as consumers increasingly move their shopping habits online. Macerich exited the assets that are likely to see falling sales growth and occupancy levels as e-commerce takes market share. Although many retailers will look to reduce their store count over the next decade, the high foot traffic and sales productivity of Class A malls that now make up Macerich's portfolio continue to make them attractive places for retailers to place stores.

Fundamentals for the Class A malls in Macerich's portfolio have almost fully rebounded from the coronavirus pandemic. While shopping at brick-and-mortar locations fell as some consumers shifted purchases to e-commerce platforms in 2020, foot traffic has since returned to prepandemic levels, leading to a recovery in sales growth. Macerich's revenue is protected by long-term leases, and while occupancy fell to 89% in 2020, it has almost fully recovered. We believe that Class A malls will remain dominant in brick-and-mortar retail with high-quality malls eventually returning to their prior occupancy and rent levels.

Healthpeak Properties

  • Morningstar Price/Fair Value: 0.67
  • Morningstar Uncertainty Rating: Medium
  • Morningstar Economic Moat Rating: None
  • Forward Dividend Yield: 5.84%
  • Industry: REIT—Healthcare Facilities

Healthpeak Properties is 33% undervalued relative to our $30.50 fair value estimate. This affordable REIT stock focuses on healthcare facilities and offers a 5.84% forward dividend yield.

The top healthcare real estate stands to benefit disproportionately from the Affordable Care Act. With an increased focus on higher-quality care being performed in lower-cost settings, the best owners and operators in the industry, which can provide better outcomes while driving greater efficiencies, should see demand funneled to them from the best healthcare systems. Additionally, the baby boomer generation is starting to enter its senior years, and the 80-plus population, an age range that spends more than 4 times on healthcare per capita than the national average, should almost double in size over the next 10 years. Long term, the best healthcare companies are well positioned to take advantage of these industry tailwinds.

Given the significant challenges that the coronavirus presented to the senior housing industry, Healthpeak made the strategic decision in 2020 to dispose of most of the company’s senior housing assets in multiple transactions for around $4 billion in total proceeds. As a result, Healthpeak’s life science and medical office portfolios are now prominently featured in the company’s portfolio as the proceeds from the senior housing sales were reinvested into these two sectors. Healthpeak has high-quality assets in top markets that attract credit-grade tenants in both segments, so we believe it makes sense to strategically focus the company on the segments where it has an advantage. The company also completed a merger with Physicians Realty Trust in a $5 billion deal that closed in March 2024, adding 16 million square feet of high-quality medical office buildings that complements the company’s own portfolio. Following the merger, Healthpeak derives approximately 55% of the company’s net operating income from medical office, 35% from life science, and 10% from a small portfolio of continuing-care retirement communities and other triple-net assets. Despite the possibility of further changes to the ACA, we think any changes will still result in a coordinated value- and outcome-based system that will provide Healthpeak’s current portfolio with strong tailwinds.

Sun Communities

  • Morningstar Price/Fair Value: 0.72
  • Morningstar Uncertainty Rating: Medium
  • Morningstar Economic Moat Rating: None
  • Forward Dividend Yield: 3.04%
  • Industry: REIT—Residential

Sun Communities rounds out our list of the best REITs to buy. Although it is one of the most expensive REITs here, Sun Communities still looks undervalued as shares trade 28% below our fair value estimate of $172 per share.

Sun Communities is a residential REIT that focuses on owning manufactured housing, residential vehicle communities, and marinas. The company has grown significantly over the past decade after spending $11.8 billion since 2010 to build a portfolio of 666 properties from just 136 at the end of 2010. Sun targets owning properties that are desirable as second homes or vacation properties with nearly 50% of the portfolio located in either Florida or Michigan near major bodies of water.

Sun Communities mainly collects rental income from tenants. The tenants own their own manufactured homes, residential vehicles, and boats, but then pay Sun for the right to place their homes or park their vehicles in the community. The rental income is consistent through the year for the manufactured housing portfolio and RV properties with annual memberships, but there is significant seasonality to the transient RV properties and the marina portfolio. Sun Communities also collects revenue from the sale of manufactured homes and provides services to the communities, though these activities represent a much smaller portion of the company’s total EBITDA.

The sector has benefited from an aging population with a desire to own a second home or have the time to go on regular vacations. The growth in the over-60 population over the past decade has supported rent growth that exceeds both inflation and the average rent growth reported by the multifamily REIT sector. While we anticipate that the continued growth of this demographic will support continued rent growth above inflation, we believe that much of the demand growth will be offset by the baby boomer generation starting to turn 80 within the next few years, which is when we believe that people age out of the target demographic for manufactured housing. Additionally, the transient business declined in 2023, leading to same-store revenue growth decelerating from the 2021 highs, a trend that we anticipate will continue in 2024. Therefore, while we believe that internal growth will remain solid for the next several years, we don’t think it will match the heights the company achieved over the past decade.

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More About REIT Investing

Investors who’d like to extend their search for the best REITs can do the following:

  • Review Morningstar’s comprehensive list of real estate stocks to investigate further.
  • Use the Morningstar Investor screener to build a shortlist of REITs to research and watch.
  • Read the latest news about notable REITs from Morningstar’s lead real estate analyst Kevin Brown.

The author or authors do not own shares in any securities mentioned in this article.Find out about Morningstar’s editorial policies.

The Best REITs to Buy (2025)

FAQs

What are the best performing REITs? ›

9 of the Best REITs to Buy for 2024
REIT StockForward dividend yield*
Equity Residential Properties Trust (EQR)3.9%
Invitation Homes Inc. (INVH)3.1%
Ventas Inc. (VTR)3.5%
SBA Communications Corp. (SBAC)2.1%
5 more rows
Jul 2, 2024

What REITs pay the highest dividend? ›

4 Top Dividend-Paying REIT Stock Picks
  • Ventas Inc. (VTR)
  • Realty Income Corp. (O)
  • Kilroy Realty Corp. (KRC)
  • Sun Communities Inc. (SUI)
Jul 25, 2024

What is the best REIT to invest in 2024? ›

Best REIT ETFs
Top REIT ETFsTicker SymbolPerformance (Total Returns) Over the Past 12 Months
iShares U.S. Real Estate ETF(NYSEMKT:IYR)9.2%
Schwab U.S. REIT ETF(NYSEMKT:SCHH)10.7%
Real Estate Select SPDR Fund(NYSEMKT:XLRE)10.2%
iShares Cohen & Steers REIT ETF(NYSEMKT:ICF)11.0%
1 more row
Jul 23, 2024

How to pick the best REIT? ›

When you're ready to invest in a REIT, look for growth in earnings, which stems from higher revenues (higher occupancy rates and increasing rents), lower costs, and new business opportunities. It's also imperative that you research the management team that oversees the REIT's properties.

What is the downside of REITs? ›

When investing only in REITs, individuals incur more risk than when they are part of a diversified portfolio. REITs can be sensitive to interest rates and may not be as tax-friendly as other investments.

What is better than REITs? ›

Direct real estate offers more tax breaks than REIT investments, and gives investors more control over decision making.

Which REITs pay out monthly? ›

The Top 10 list of companies that have paid monthly dividends in 2022 includes ARMOUR Residential REIT, Inc., Orchid Island Capital, Inc., AGNC Investment Corp., Oxford Square Capital Corp., Ellington Residential Mortgage REIT, SLR Investment Corp., PennantPark Floating Rate Capital Ltd., Main Street Capital ...

How to buy REITs for beginners? ›

As referenced earlier, you can purchase shares in a REIT that's listed on major stock exchanges. You can also buy shares in a REIT mutual fund or exchange-traded fund (ETF). To do so, you must open a brokerage account. Or, if your workplace retirement plan offers REIT investments, you might invest with that option.

What is the average return on a REIT? ›

Which REITs stand out versus the stock market?
CORE FFO PER SHARE3-YEAR5-YEAR
REIT average8%7%
S&P 500 average11%11%
DIVIDEND PER SHARE3-YEAR5-YEAR
Prologis14%12%
8 more rows
Mar 4, 2024

Is it a good time to get into REITs? ›

There are three key reasons to invest in listed REITs right now, starting with the fact that REITs have outperformed stocks and bonds when yields and growth move lower. Demand is healthy while supply is constrained, and REIT valuations relative to the broader equity market are meaningfully below the historical median.

How many REITs should I own? ›

“I recommend REITs within a managed portfolio,” Devine said, noting that most investors should limit their REIT exposure to between 2 percent and 5 percent of their overall portfolio. Here again, a financial professional can help you determine what percentage of your portfolio you should allocate toward REITs, if any.

What is the 90% rule for REITs? ›

To qualify as a REIT, a company must have the bulk of its assets and income connected to real estate investment and must distribute at least 90 percent of its taxable income to shareholders annually in the form of dividends.

What I wish I knew before investing in REITs? ›

REITs must prioritize short-term income for investors

In exchange for more ongoing income, REITs have less to invest for future returns than a growth mutual fund or stock. “REITs are better for short-term cash flow and income versus long-term upside,” says Stivers.

Which REITs have the highest return? ›

Best REITs by total return
Company (ticker)5-year total return5-year dividend growth
Prologis (PLD)121.8%12.4%
Eastgroup Properties (EGP)107.9%13.3%
Gaming and Leisure Properties (GLPI)99.7%1.1%
Extra Space Storage (EXR)98.5%14.0%
4 more rows
Jan 16, 2024

Where is the best place to hold a REIT? ›

Is a Roth or traditional IRA the best choice? To be clear, retirement accounts are ideal places to hold REIT investments, as the benefits of tax-deferred investing can magnify the already tax-advantaged nature of these companies.

Are REITs still a good investment? ›

REITs are interest-rate-sensitive, which means they tend to outperform the broad market when interest rates fall and underperform when interest rates rise. During the trailing one-year period, the Morningstar US Real Estate Index returned 7.25%, while the Morningstar US Market Index returned 26.40%.

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