Real estate investment trusts (REITs) are an attractive investment choice for many investors, thanks to the fact that they offer high yields, simple tax rules, and high liquidity.
As an investor, you have as many as 12 sectors to pick from when it comes to REIT investing, so it’s important to know where you fit in amongst the pack.
In this blog post, we focus on the best REIT choices for those looking to invest in commercial property.
The Best REITs to Invest
The 12 REIT sectors can be defined as follows:
- Office REITs
- Industrial REITs
- Retail REITs
- Hotel/Lodging REITs
- Multifamily/Residential REITs
- Timberland REITs
- Healthcare REITs
- Self-Storage REITs
- Infrastructure REITs
- Data Center REITs
- Diversified REITs
- Specialty REITs
The four major REIT sectors within the commercial space, however, are retail, office, healthcare, and apartment REITs.
Here, we’ll explore the best REITs to invest in for each of those top sectors.
Best REITs in the Retail Sector
Many investors are understandably nervous about investing in the retail asset class.
You may be reluctant to invest due to the flurry of reports documenting the mass closure of retail stores and the continued rise of online shopping.
While traditional stores may prove to be a risky choice when it comes to REIT investing, service-based retail such as cafes, drug stores, restaurants, and theaters are not vulnerable to the same threat of e-commerce.
These locations are continuing to boom, making them very viable investment options for those looking at new REITs.
Realty Income is a REIT that specializes in freestanding, single-tenant commercial property in the retail sector.
According to the latest figures, Realty Income currently has over 5,900 properties in its portfolio.
The majority of Realty Income’s properties are service-based providers, including companies like FedEx and LA Fitness.
Realty Income also has some blue-chip tenants like Walgreens and AMC Theatres, both of which are practically invulnerable to the precarious nature of the retail market in 2019 and beyond.
In addition, Realty Income has an impressive track record, with over 20 years of experience growing dividends for its investors.
The corporation currently offers a dividend yield of 3.55%.
Simon Property Group
Malls fall unto A, B, or C classes based on various factors, such as location and the range of services they provide customers.
While category B and C malls are struggling, category A malls are still popular among consumers thanks to the diverse range of amenities they offer and their prime locations.
Simon Property Group is one of the best performing REITs in the mall sector and is the largest REIT currently on the market.
The corporation owns over 200 high-end retail properties across 37 states, Puerto Rico, and Asia.
As one of the best REITs to buy now, Simon Property Group possess a stellar reputation for being able to engage with consumer needs and demand and effortlessly weather the storms of the retail sector.
They have a reputation for turning their lowest performing stores into service-based retail options that still prove popular in the struggling world of retail.
Best REITs in the Multifamily/Residential Sector
As one of the four main REIT sectors, apartment building REITs make up approximately 15% of the total REIT Index.
Homeownership rates have dropped to a mere 64.3%, much lower than what they were in 1994.
As such, investing in REITs that specialize in apartment complexes and other residential properties are a smart choice for investors in 2019 and beyond.
AvalonBay Communities Inc.
AvalonBay Communities Inc. has a reputation for being one of the strongest multifamily REITs on the market.
This investment trust has ranked number one for three consecutive years in the Online Reputation Assessment™ Top Multifamily REIT rankings, and looks to be on the same pace for 2019.
AvalonBay Communities Inc. excel in acquiring, developing, redeveloping, and managing multifamily complexes in primary markets across the US, including California and New York.
Since 2010, the company’s Core FFO per share has risen by 117%, compared to the market average of 83% over the same period.
The REIT’s annual dividend has risen to $6.08 per share in 2019, from $3.57 per share in 2010.
UDR Inc. has been purchasing, managing, renovating, and developing multifamily complexes throughout the US for over 46 years.
As of September 2018, the REIT owned just under 50,000 apartment homes.
UDR’s divided yield has remained around 3% throughout 2019, sitting at 2.84% as of October 2019.
Best REITs in the Office Sector
Office REITs are a diverse sector, as some REITs specialize in unique tenant classes, such as marketing firms or biotech companies.
Other REITs hone in on certain property types, from towering skyscrapers to alternative buildings for the modern millennial.
According to the FTSE, office REITS have produced a 2019 dividend yield of 3.23% across 20 investment trusts in total.
City Office REIT
City Office REIT focuses on acquiring offices in high-growth markets and has expanded its portfolio to double what it was in previous years.
City Office REIT targets assets in markets with above average job growth, which minimizes investor risk and promises higher returns on investments.
This office investment trust has a 2019 dividend yield of 6.56%.
Boston Properties (BXR)
Boston Properties (BXR) is one of the largest owners, managers, and developers of Class A office space in the US.
They own and manage assets in some of the most successful markets in the US, including Los Angeles, New York, and Washington DC.
The investment trust continues to see rapid growth.
In 2017, the REIT increased their diluted FFO per share from $6.03 to $6.22.
Boston Properties’ dividend yield was 2.9% as of September 2019.
Best REITs in the Healthcare Sector
Healthcare is also a major REIT asset class. Healthcare REITs own and manage a range of healthcare properties, from skilled nursing facilities to senior care homes.
While the healthcare market has been viewed as volatile and subject to losses historically, thanks to an aging population, REITs that specialize in senior care facilities are proving to be lucrative.
A leading REIT in the healthcare sector, Ventas, Inc. owns a sizable portfolio of over 1,200 healthcare facilities in some of the most profitable markets.
Ventas, Inc. has also experienced extensive growth in recent years. They have seen an 8% compound annual dividend increase since 2001.
Ventas, Inc. is also one of the best REITs to invest in if you are looking for a budget investment.
Shares are trading at $72, and shares are currently yielding at 4.35%.
LTC Properties predominantly focuses on long-term healthcare facilities and senior housing.
This makes the REIT a wise investment thanks to the growing number of Baby Boomers who will soon be in need of care facilities in the later years of their retirements.
As one of the smaller Healthcare REITs on the market, LTC Properties is worthy of your attention thanks to the strength of its balance sheet.
The REIT has seen its dividends grow year by year.
The investment trust’s current dividend yield is around 4.5%.
Investing in REITs in 2019 and Beyond
REIT investing offers a number of benefits. REITs typically have low barriers to entry and offer high yields, and high liquidity.
REITs are also a great option if you are looking to diversify your commercial real estate portfolio.
By focusing on the strongest REITs for each of the most popular asset classes, you will maximize your profits and minimize your investment risk.
Interested in REIT investing? You can find out more about the pros and cons of REIT investing and how to invest in our in-depth blog post on the topic.